Fact check: Is workplace discrimination against older people costing $10 billion a year?

Age Discrimination Commissioner Susan Ryan wants more to be done to ensure older people can work longer.

"We're losing about $10 billion or so a year, but we're also losing the opportunity - if we could increase the employment of people over 55 - of up to $33 billion a year," Ms Ryan told ABC's The World Today. "It's big, big money."

Does discrimination against older people in the workforce cost Australia $10 billion a year? ABC Fact Check investigates.

Research on paid work by older Australians

A spokesperson for Ms Ryan told Fact Check the figure of a $10 billion loss came from a 2009 report commissioned by the National Seniors Australia Productive Ageing Centre.

The research, undertaken by public policy consultants the Eidos Institute and the University of Southern Queensland, used gross domestic product (GDP) per capita to value the economic loss of not using skills and experience.

The data comes from two groups of older Australians:

• The first were those _unemployed and looking for full-time work_. In March 2009, 39,331 people aged 55 and over were in this category. Multiplying this number by GDP per capita - which at the time was $53,523 - produced a loss of $2.1 billion incurred by not employing these workers.

• The second group were 161,800 older Australians who _wanted to work but were not looking for work_ in September 2008. Their lost GDP was $8.7 billion.

Combining the two results in a total loss of $10.8 billion. This figure has been used by many other organisations, including the Greens, an advisory panel to the federal Treasury, the Australian Institute of Management, Global Access Partners, and the Financial Services Council.

The report also estimated the economic contribution of unpaid work by those aged 55 and over. It limited its estimate to volunteering, care of a person with a disability, and child care. "This approach does not include all the unpaid help or care that older Australians provide to others, so the estimates of the value of unpaid work are conservative," it said. It did not produce a figure for the unpaid contribution of the two groups described above.

Can the economic loss be quantified?

Professor Jeff Borland, a labour economist at the University of Melbourne, tells Fact Check the $10 billion estimate is likely to be biased in two different directions.

"They multiply the number of people working by GDP per capita and GDP per capita is actually the whole population," Professor Borland said. "There's 40 to 50 per cent of the population who aren't working."

Therefore the economic contribution of older unemployed Australian workers was likely to be under-estimated.

And he says the assumption that all of the second category want to work full-time is likely to over-estimate the economic loss of not employing them.

"The even bigger problem is assuming [the second group] would want to work full-time because a lot of those marginally attached people have things like caring duties and in fact would be more likely to move into part-time employment," he said.

Associate Professor Roger Wilkins from the Melbourne Institute of Applied and Social Research at the University of Melbourne says "it's a somewhat dubious exercise trying to quantify the value of the forgone output".

"Certainly if you look over the last 20 years, as they say in the Still Putting In report, employment of older people has actually been growing very strongly," he said.

Associate Professor Wilkins says it's not accurate to assume that these older Australians not working is forgone output.

"I guess they are trying to give people a sense of the magnitude... and there's this idea that if we could just flick a switch we'd get a $10 billion boost to our GDP," he said. "It's a very fanciful kind of exercise."

He says the wages older Australians would have earned had they been working is more relevant and the ABS Survey of Income and Housing could be used to match unemployed older Australians not working to people who are working based on their skills to arrive at a more accurate figure of economic loss.

Professor Borland says there's not a lot of direct evidence to show whether discrimination against older workers is causing a major economic loss to the country.

"It's not as simple as just saying if we gave an old person a job we would increase GDP by $90,000 because if that job has come at the expense of younger people, that's not really a net gain for Australia," he said.

Associate Professor Xiaodong Gong, an economist with the National Centre for Social and Economic Modelling at the University of Canberra, sayscalculating the hypothetical output by multiplying GDP per worker by the number of older unemployed who wanted to work involves assuming the productivity and hours of those older workers be the same as those of an average worker in Australia.

"But even if those non-working older Australians could produce so much GDP as an average worker per hour, what is the opportunity cost to society for them to do so?" he said.

Tim Adair, director of the National Seniors Productive Ageing Centre that produced the report, defends the assumptions made to arrive at the $10 billion figure.

Dr Adair says research from the UK shows that productivity doesn't decline with age.

"That research conducted by the Essex business school found that there was a study of BMW in Germany where they set up a production line staffed only by older workers and where productivity actually increased over the first year," he said. "So although as people age there are potentially physical implications for their productivity due to declining health, often that's offset by their knowledge and experience."

On the topic of working hours, he said: "As we're working longer and the pension age is increasing, people do see a need to not only work as long as they would like to, but also to work in a full time capacity to make the most of their working years to build up their retirement savings."

He says the centre is undertaking a study that will look at the benefits to employers of lower turnover of older workers. "We're updating those figures from the perspective of what are the benefits specifically for employers of hiring older workers."

The verdict

Susan Ryan's claim that failing to use the skills and experience of older Australians in the workforce represents a $10 billion loss is based on the number of unemployed people over 55, and the number who want to work but are not actively looking for work.

However, experts say the calculation is problematic because it uses GDP per capita instead of the wages older workers would actually earn, doesn't take account of the number of older Australians who want to work part-time and assumes the productivity of all older Australians not working is the same as the rest of the workforce.

Ms Ryan's claim is unsound.

Sources

• Susan Ryan: Older workers need career checkups and 'sea change' from employers. The World Today

• Age discrimination commissioner Susan Ryan addresses the National Press Club

• Still Putting In. Measuring the economic and social contributions of older Australians. May 2009

• Australian National Accounts: National Income, expenditure and product, Jun 2014

• Labour force, Australia, detailed -August 2014

• Persons not in the labour force, Australia, September 2013