(For American readers: "Pensioners" are government-supported retired people)
By Jessica Brown
The OECD this week released a report that claimed that one in four Australian pensioners live in poverty. According to the report, pensioners in Australia face the fourth highest rate of poverty in the developed world. According to the report’s author, Edward Whitehouse, ‘Public pension spending is only 3.5% of national income in Australia, compared with an average of over 7% of GDP in OECD countries.’
While these claims seem shocking, closer scrutiny shows them to be almost meaningless. The ‘poverty line’ used by the OECD is half of median income. What this tells us is that a large group of pensioners have incomes lower than the average. What it doesn’t tell us is how this actually affects their standard of living.
Another, more in-depth report called ‘Growing Unequal’ released by the OECD last year looked beyond relative income poverty. It also examined material deprivation: whether people had adequate access to necessities such as housing, food, health care, heating, etc.
It found that while the overlap between relative income poverty and material deprivation was ‘far from perfect’ for the population as a whole, this was especially so for elderly people.
Despite having relatively low incomes, many elderly people own their homes or other assets. In Australia, they have access to extensive free health care and subsidised private health insurance, transport, and utilities. The report therefore concluded that ‘income poor older people are not necessarily experiencing material hardship.’
Claims that Australia’s level of spending on pensioners is miserly also fail to stand up to scrutiny. Australia spends a relatively small amount on pensions compared to the OECD average, not because we are tight-fisted but because we have a targeted and means-tested system. In contrast, many European countries have social insurance systems that provide universal pensions often more generous to high-income earners. This means that it’s possible for a country to spend large amounts on pensions but also have a high level of material deprivation amongst pensioners.
Measuring government spending on pensions alone also doesn’t take into account the effects of private retirement savings such as superannuation.
Measuring the standard of living of elderly Australians is a worthwhile endeavour. However, meaningless statistics and invalid comparisons do little to achieve this.
Above is a press release from the Centre for Independent Studies, dated July 3rd.
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