To whom will we decumulate? An inconvenient truth about

©NIDEA 1

Natalie Jackson

To whom will we decumulate? An inconvenient truth about population ageing

Professor of Demography, Director, National Institute of Demographic and Economic Analysis (NIDEA)

Presentation to Spending the Savings: Decumulation and Middle Income Retirement Symposium, RPRC, University of Auckland Business School

November 30th 2012

©NIDEA 2

Outline

• The demography of birth and fortune

• Baby booms, busts, blips, echoes

• Leading / Lagging Edge Boomers

• Decumulators and Accumulators

• What population ageing [really] means – an inconvenient truth

• Subnational troubles and issues

• Relative income / income ‘capture’

©NIDEA 3

Some background demography: Booms, Busts, and Blips (‘echoes’) AT BIRTH

0

10,000

20,000

30,000

40,000

50,000

60,000

70,0001876

1881

1886

1891

1896

1901

1906

1911

1916

1921

1926

1931

1936

1941

1946

1951

1956

1961

1966

1971

1976

1981

1986

1991

1996

2001

2006

2011

Bir

ths (

N)

Baby ‘Busts’

‘Gen X’ ‘Gen Z’

‘1991’

Baby

Blip

Statistics New Zealand Births

Currently turning 65

‘Official’ Boom

©NIDEA 4

586,330

1,437,690

587,020

1,106,740

1,545,140

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

20

11

20

16

20

21

20

26

20

31

20

36

20

41

20

46

20

51

20

56

20

61

Nu

mb

er

Projected numbers aged 65+ years

2009 Series

2011 Series

How many [Decumulators] now?

Last Boomers

enter the pension

queue here

Source: Statistics NZ 2009, 2012 Projected population of New Zealand by age and sex, 2009 and

2011(base)-2061

©NIDEA 5

Source: Statistics NZ various years 5

How long will they live? [forever!!]

0102030405060708090

100

0 10 20 30 40 50 60 70 80 90 100

Perc

en

tag

e S

urv

ivin

g (

lx)

Age

‘Rectangularisation’ of the New Zealand survival curve

1934-38 (68.5 Years)

1950-52 (71.3 years)

1970-72 (74.6 years)

1990-92 (78.7 years)

2005-07 (82.2 Years)

Life expectancy at birth for

females born in these years

Boomers

©NIDEA 6

27

14 10 10 8 6 5 4 4 3 2 1 1 1 1 1

05

10152025303540

Au

ckla

nd

Reg

ion

Can

terb

ury

…

Wel

lingt

on

…

Wai

kato

Reg

ion

Bay

of

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…

Man

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u-…

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Haw

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Bay

…

No

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Tara

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ion

Sou

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Reg

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Mar

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Gis

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65+ Years by Region 1996

2011

Where do they live?

69% in 5

regions

©NIDEA 7

1,127,587 771,267

New Zealand’s Baby Boomers at Birth and in 2006 (82% alive and living in NZ + Australia in 2006)

Cohort size atBirth

NZ Born at 2006Census (68%)

That may not be all of them..

162,000

NZ- Born in Australia

(14%)

©NIDEA 8

Boomers and ‘the rest’

5.0 0.0 5.0

0-4 5-9

10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84

85+

percentage at each age

New Zealand 2011

Male Female

5.0 0.0 5.0

0-4 5-9

10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84

85+


New Zealand 2031

Male Female

65+ years: 13.3% 65+ years: 21.3%

Gen TGYH

Gen TGYH ‘1991’ Blip

1991 Blip

©NIDEA 9

Decumulators/Sellers and Accumulators/Buyers

Total NZ 2006-2031

0.0

0.5

1.0

1.5

2.0

2.5

3.0

20

06

20

11

20

16

20

21

20

26

20

31

Mill

ion

s

Accumulators(25-64)

Decumulators(65+ )

5.0 2.5 0.0 2.5 5.0

0-4 5-9

10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84

85+


Total New Zealand 2011 (2031 Unshaded)

Male Female

Lagging

Edge Leading Edge

Decumulators:Accumulators 2.6/10 to 4.4/10

©NIDEA 10

An inconvenient truth about population ageing

©NIDEA 11

The end of growth

©NIDEA 12

What Population Ageing [really] means. A phenomenon in four dimensions

• Numerical Ageing – Increase in numbers of elderly (primarily caused by

increased life expectancy (+ locally, in-migration of retirees)

• Structural ageing – Increase in proportions of elderly (primarily caused by

low/falling birth rates (+ locally, out-migration of young adults)

• Natural decline – More elderly than children more deaths than births

• Absolute decline – Inability of ‘replacement migration’ to replace the ‘lost’ births and

increased deaths

– Subnationally - an intractable shift from ‘old’ to ‘new’ cause of decline (net migration loss + natural decline)

©NIDEA 13

7 Billion and Counting. Yes but..

©NIDEA 14

Globally, population ageing is slowing and ending growth

6.0 4.0 2.0 0.0 2.0 4.0 6.0

0-4 5-9

10-1415-1920-2425-2930-3435-3940-4445-4950-5455-5960-6465-6970-7475-7980-8485-8990-9495-99100+


China 2020 (end of growth 2026)

Male Female

6.0 4.0 2.0 0.0 2.0 4.0 6.0

0-4 5-9

10-1415-1920-2425-2930-3435-3940-4445-4950-5455-5960-6465-6970-7475-7980-8485-8990-9495-99100+


Japan 2020 (declining since 2006)

Male Female Male Female

Source: US Census Bureau International Database http://www.census.gov/ipc/www/idb/

©NIDEA 15

The More Developed Countries are contracting

MDCs (58) Medium Series

65+ Years All other age groups combined

2011-2021

(2.9%)

25% -1.3%

2011-2031

(4.6%)

49%

(+98 million)

-3.9%

(-41million)

US Census Bureau International Database: More Developed Countries by age and sex

ALL future growth at 65+ years

©NIDEA 16

-20

0

20

40

60

80

100

120

1400

-4

5-9

10

-14

15

-19

20

-24

25

-29

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-34

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-39

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-44

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-54

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-59

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-64

65

-69

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-74

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-79

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-84

85

-89

90

+

Perc

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han

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New Zealand: Projected change by age (%) (MEDIUM)

2011-2021 (8.9%)

2011-2031 (17.9%)

Ageing-driven growth is not the same as youth-driven growth

Source: Statistics NZ 2012 Projected population of New Zealand by age and sex, 2011(base)-2061

©NIDEA 17

New Zealand: similar trends to all MDCs, just lagging the field

Total NZ Medium Case

65+ Years All other age groups combined

2011-2021

(8.9%)

40.3% 4.1%

2011-2031 (17.9%)

88.5% 7.1%


2/3 of New Zealand’s growth 2011-2031

expected to be at 65+ years

©NIDEA 18

% % %

Ruapehu -22.5 Gore -8.9 Clutha -4.6

Wairoa -18.5 Opotiki -7.1 Waitomo -4.1

Chatham Islands -15.8 Buller -6.5 McKenzie -3.1

Kawerau -14.7 Otorohanga -6.4 Invercargill -2.2

Rangateiki -11.6 Stratford -6.1 Waimate -1.9

South Waikato -11.6 Wanganui -5.4 Gisborne -1.3

South Taranaki -9.7 Waitaki* -5.0 Grey -0.7

Tararua -9.5 Southland -4.8 Horowhenua -0.3

NZ TAs experiencing decline 1996-2011 (36 % NZ TAs)

Stats New Zealand Estimated Resident Population RC, TA *Natural decline

©NIDEA 19

©NIDEA 20

-10

0

10

20

30

40

50

60

70

Perc

enta

ge o

f al

l gro

wth

2011-16

2016-21

2021-26

2026-31

Share of NZ’s future growth will be most uneven


(MEDIUM CASE)

©NIDEA 21

Most growth at 65+ years

• Between 2011 and 2031, ALL ‘growth’ in 56 of NZ’s 67 Territorial Authorities (84%) projected to be at 65+ years; all other age groups (combined 0-64 yrs) projected to decline c.23 of these TAs likely to experience overall decline

c.12 likely to experience both net migration loss and natural decline

• Of the remaining 11 TAs: 2 = 95+% of growth at 65+ (Christchurch; Whangarei)

3 = 60-63% growth at 65+ (Waik; Palm. Nth; Waimak.)

3 = 44-46% growth at 65+ (Wtg; Selwyn; TGA)

3 = 36-37% growth at 65+ (Auck; Ham; Queenstown)

©NIDEA 22

38

12 12 9

6 5 5 3 3 2 2 1 1 1 1 1 05

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Au

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Wel

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Wai

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Reg

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25-44 Years by Region 1996

2011

Where do New Zealand’s first home buyers (25-44 years) live?

76% in 5

Regions

©NIDEA 23

Auckland Decumulators (65+) and Accumulators (25-64 yrs)

Greater Auckland 2006-2031

0.00

0.20

0.40

0.60

0.80

1.00

1.20

20

06

20

11

20

16

20

21

20

26

20

31

Mill

ion

s

Accumulators (25-64)

Decumulators (65+ )

5.0 2.5 0.0 2.5 5.0

0-4 5-9

10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84

85+


Greater Auckland 2011 (2031 Unshaded)

Male Female

Lagging

Edge Leading Edge

Dec:Acc 2.0 to 3.2 per 10

©NIDEA 24

Rural Decumulators and Accumulators

Total NZ 2006-2031

0.00

0.00

0.00

0.01

0.01

0.01

0.01

0.01

0.02

0.02

20

06

20

11

20

16

20

21

20

26

20

31

Mill

ion

s

Accumulators(25-64)

Decumulators(65+ )

5.0 2.5 0.0 2.5 5.0

0-4 5-9

10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84

85+


Matamata-Piako 2011 (2031 Unshaded)

Male Female

Lagging

Edge Leading Edge


©NIDEA 25

West Coast Decumulators and Accumulators

Total NZ 2006-2031

0.00

0.00

0.00

0.00

0.00

0.01

0.01

20

06

20

11

20

16

20

21

20

26

20

31

Mill

ion

s

Accumulators(25-64)

Decumulators(65+ )

5.0 2.5 0.0 2.5 5.0

0-4 5-9

10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84

85+


Buller District 2011 (2031 Unshaded)

Male Female

Lagging

Edge Leading Edge


©NIDEA 26

Projections and their assumptions

o YES migration is included (net international gain 12,000 pa)

o YES fertility is included (TFR falling to 1.9 births by 2026)

o YES increasing life expectancy is included (to 88.0 years for males and 90.5 years for females) o [Stats NZ Medium Case projections 2006-

base 2012-Update]

©NIDEA 27

If we were to assume: • Total Fertility Rate 2.1 (remaining constant)

• Life Expectancy 95.0 years by 2061 (Stats NZ highest assumption)

• Annual Net Migration 100,000 (4X Stats NZ Highest; 8X medium)

• age structure of migrants very youthful + migration positive at all ages

• 2061 population would be 10.8 million; 22% would be 65+ years

• 15 million by 2061 would require over 150,000 net migration gain per year at replacement level fertility, or birth rate to return to Baby Boom levels (eg. 3.5 births per woman) + 100,000 migrants per year

15 million by 2061??

©NIDEA 28

Another inconvenient truth: Relative income >> [in]ability to accumulate

©NIDEA 29

Median Income (Females by Age/Total Females), Full-Time Employment by Cohort, 1981-2006

20

40

60

80

100

120

Pe

rce

nta

ge

1982-86

1977-81

1972-76

1967-71

1962-66

1957-61

1952-56

1947-51

1942-46

1937-41

1931-36

Stats NZ (2010) Customised Database

Birth

Cohort

Females need to get off

to an early start

©NIDEA 30

Median Income (Males by Age/Total Males), Full-Time Employment by Cohort, 1981-2006

20

40

60

80

100

120

Pe

rce

nta

ge

1982-86

1977-81

1972-76

1967-71

1962-66

1957-61

1952-56

1947-51

1942-46

1937-41

1931-36

Stats NZ (2010) Customised Database

Birth

Cohort

Slower start but higher mid-life

relative incomes for males

©NIDEA 31

Income ‘capture’ - Highest median income, MALES, Full-Time

Peak earner age group

Cohort Born

1976 35-39 1937-41

1981 35-39* 1942-46

1986 40-44 1942-46

1991 40-44 1947-51 Leading Edge 1

1996 45-49 1947-51 Leading Edge 1

2001 45-49 1952-56 Leading Edge 2

2006 45-49 1957-61 Lagging Edge 1

New Zealand’s Accumulators

*may have shared top spot with 60-64 years Stats NZ Customised Database

©NIDEA 32

Income ‘capture’ - Highest median income, MALES, Full-Time


Cohort Born

1976 30-34 1942-46*

1981 35-39 1942-46*

1986 35-39 1947-51 Leading Edge 1

1991 40-44 1947-51 Leading Edge 1

1996 40-44 1952-56 Leading Edge 2

2001 45-49 1952-56 Leading Edge 2

2006 45-49 1957-61 Lagging Edge 1

Australian males

ABS Customised Database

©NIDEA 33

Income ‘capture’ - Highest median income, FEMALES, Full-Time


Cohort Born

1976 25-29 1947-51 Leading Edge 1

1981 25-29* 1952-56 Leading Edge 2

1986 25-29 1957-61 Lagging Edge 1

1991 25-29 1962-66 Lagging Edge 2

1996 30-34 1962-66 Lagging Edge 2

2001 30-34 1967-71 Gen X

2006 30-34 1972-76 Gen X/Y

New Zealand Females

*may have shared top spot with 60-69 years

Stats NZ Customised Database

©NIDEA 34

Income ‘capture’ - Highest median income, FEMALES, Full-Time


Cohort Born

1976 25-29 1947-51 Leading Edge 1

1981 25-29 1952-56 Leading Edge 2

1986 25-29 1957-61 Lagging Edge 1

1991 30-44 1957-61 Lagging Edge 1

1996 30-34 1962-66 Lagging Edge 2

2001 30-34 1967-71 Gen X

2006 30-34 1972-76 Gen X/Y

Australian Females

ABS Customised database

©NIDEA 35

Inconvenient as it may be..

• Accept - Population ageing is coming to a decumulating senior near you – The ratio of Decumulators to Accumulators is rising rapidly;

very rapidly in non-urban TAs

– Growth is ‘over’ in most non-urban regions

– It will become increasingly harder for non-urban home sellers to realise desired value

– Leading Edge Boomers are likely to fare much better than Lagging Edge Boomers – but not just because of numbers

• Buffer - respond to the demography – Incorporate demographic change in all your analyses and

interpretations

– Encourage higher incomes for younger people – ‘we’ need them as much as they do

• Celebrate the advance warning / reflect on intergenerational equity

©NIDEA 36

• Thankyou

• [email protected]

• www.waikato.ac.nz/nidea

mailto:[email protected]

http://www.waikato.ac.nz/nidea

Documents

To whom will we decumulate? An inconvenient truth about