AUSTRALIA’S ageing population equates to an ageing national workforce, an imbalance that threatens significant labour shortages capable of stifling economic growth – and South Australia faces the greatest potential threat.

Growth in Australia’s working population is projected to decline dramatically from about 170,000 people per annum, to just 12,500 per annum during the 2020s. Australia will rely on the 45-plus age group for 85 per cent of growth in workforce numbers from 2002-2012, according to a recent Australian National Training Authority study. The study concluded that “the retention and skilling of the 3.5 million Australian workers currently aged over 45 and the further expansion of the mature-age workforce (will be) more important than ever before”.

South Australia already has the oldest population and workforce in Australia, so the prospect of acute labour shortages looms large unless we quickly embark on significant workforce planning initiatives.

Government and industry in Australia have been slow to identify and respond to the implications of workforce ageing. However, two recent reviews commissioned by the SA Government emphasise that SA urgently needs to develop and adequately resource a coherent workforce development strategy. In response to these reports, the State Government has agreed to develop a strategy and establish a modest Workforce Development Fund to respond to workforce planning needs.

Is this enough? Comprehensive retention and recruitment strategies must be put in place soon to overcome looming skill and labour shortages arising from workforce ageing. Such strategies must counter the impact of the rapid and unsustainable loss of experienced workers arising from increasing rates of retirement.

Until now, the decision to retire was relatively straightforward. Most employers encouraged or required retirement at a specified age and most employees looked forward to retiring. While compulsory retirement has been abolished, few people appear to be interested in working beyond the age of 65. The decision to retire is driven largely by retirement income prospects. Early retirement is only possible for people fortunate enough to have a generous pension or superannuation scheme. The vast majority of the population faces the harsh reality of living on meagre super savings or the old-age pension. This group is likely to postpone retirement if possible – and demographic changes in an ageing workforce will make this an option.

A key problem is that the rate of retirement will escalate as the baby-boomer generation retires and fewer young people are available to work as a result of a declining fertility rate. Pressure will build to develop strategies promoting delayed or phased retirement and simultaneously improve job prospects for disadvantaged young people currently unable to gain secure or rewarding employment.

The Federal Government must work with states and territories to develop a national workforce development strategy and fund a program to drive change. Much can be learned from recent European initiatives. Many member states of the European Union have reversed previous policies of shedding older workers and modified their early-retirement schemes to encourage gradual retirement and part-time employment for older workers. These new policies are usually framed as active-ageing policies, often allied with the induction of new, younger workers into the workforce. The governments of the Netherlands and Finland have adopted proactive workforce development strategies in response to demographic projections of higher dependency ratios, an ageing population and a shrinking workforce. Rising participation rates of 55-59 and the 60-64 year-olds indicate apparent success.

The German tripartite Alliance for Jobs continues to focus on youth unemployment and training but is also developing and implementing strategies to target older workers. The German government has allocated about DM10.5m to research projects designed to identify the implications of an ageing workforce on the German economy.

The state pension scheme in Sweden has recently been adjusted to include a basic defined-benefit component which guarantees a basic income for everyone at old age, as well as a defined-contribution component geared to lifetime earnings, rather than to the best 15 years in the previous system. The intention of the change is to increase labour supply, since all employment by older workers increases their ultimate pensions.

Belgium has initiated a scheme in the nursing sector where older workers are given time off for the reception, guidance and introduction of new colleagues into the hospital sector. Another Belgian scheme involves employers providing a job with an individual vocational training program to school-leavers eligible for an additional mentorship premium; this allows for an employee over 45 to mentor the trainee. Mentors receive special training to prepare them for this role.

France introduced a Progressive Early Retirement in 1988, while a 35-hour working week policy is acting as a catalyst for recognition of the individual’s right to training. From 1991 to 1997, Renault’s ‘‘re-qualification plan’’ retrained 8200 people, many of them older workers.

Their collective agreement on the reduction of working time includes an individual training credit of 40 hours per year to avoid the problem of obsolete skills at the end of a career.

While there is growing recognition of the implications of demographic change and ageing in Australia, too little is being done to tackle potential problems. Some companies and public sector agencies have initiated workforce planning programs but these are few and far between. Alcoa, Shell, Australia Post and Westpac are offering phased or part-time retirement.

However, big questions remain unanswered – such as what reforms will be necessary to retirement incomes policy. The Federal Government must take the lead and encourage employers to invest in training and re-training rather than poaching employees.

With its commitment to workforce development, SA is well-positioned to elevate it to the national agenda. This will require such bodies as the Economic Development Board and the Training and Skills Commission to act with urgency and allocate greater resources to counter an ageing workforce.