Public Pensions and the Labour Market in New Zealand

Abstract

From 1977, New Zealand has had one of the simplest public pension systems in the world, a basic, universal pension – concentrating on the prevention of poverty in old age, with some success. The present set-up implies that without means tests, recipients can continue working, receiving a practically universal payment from their 65th birthday, and with only limited options for taking the pension before age 65. This paper samples work done at the New Zealand Treasury about the drivers of the decision to cease being active in the labour market. Hurnard (2005) analysed how changes in the eligibility age for New Zealand Superannuation (NZS) twice in the past 30 or so years have influenced older people’s decisions to participate actively in the labour market. Enright and Scobie (2009) have recently used survey data to quantify the separate effects of NZS, other income, health status, education, marital status, wealth, and so on, on the decision to participate for older workers, or to reduce the hours of working.While labour participation of older workers has risen since the gradual lift in the eligibility age from 60 to 65 between 1992 and 2001, there still is a 50% fall-off in participation between people aged 60-64 and 65-69 year olds. So New Zealand Superannuation, despite having no explicit financial disincentives, is still for many older than 65 a barrier to continued participation in the labour market. The coming acceleration of population ageing means that demand for older workers is likely to grow and that any barriers, real or imagined, should be removed.