Getting the economics of retirement wrong.

Matt Wade writes in the SMH: “The retirement of the Baby Boomer generation is beginning to reshape Sydney’s economy as jobs growth dwindles in some of the city’s most affluent suburbs.


Does Rose Bay is Sydney really have an employment problem?

The number of workers living in the Eastern Suburbs, the North Shore and the Ryde region fell in the year to November, exclusive analysis of local area jobs figures shows. Those areas also had some of the nation’s lowest unemployment rates.

One of the graphs that purportedly supports this argument is shown below.


The article lumps a number of quite different groups in together. The most important distinction that is not made is between unemployed workers and retired workers. There is also confusion around the idea of employment. Simply because a worker lives in a given area, in the case of this article the affluent suburbs of Sydney, does not mean that the economic impact  (and benefit) of that particular worker is limited to that specific suburb.

The other mistaken notion is that when an affluent worker leaves the workforce and retires their economic impact somehow changes for the worse.  This may not be the case as retirees, particularly affluent debt-free ones, are likely to have far more disposable income than younger workers.

The other mistaken notion is that employment growth in these areas has stalled as result of people retiring.  In most cases, when someone retires someone else will take their job. They may not live in the same area but there will be a commensurate increase in the number of employed workers in some other geographic area.

Terry Rawnsley, a regional economics expert with SGS Economics and Planning said “In the past a large number of retirees would have left Sydney and headed for coastal retreats but it seems many Boomers are staying put,” Rawnsley said.

“If older residents ‘occupy the crease’ it makes it harder to house new younger residents in those areas.”

The other argument, which has been floated before, is that retirees should not continue to live in their family homes in inner-city areas but should move out to let younger families live closer to work. There is no doubt that the rich people will live in the suburbs where the houses are most expensive and these areas are likely to be close to the centre of the city. But to suggest that younger, and presumably less affluent families, should be given  privileged access to real estate they cannot otherwise afford is economic nonsense.

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