Hiring older Australians: lessons from Singapore

2. Bring mature workers back in to the labour force.

Extending the retirement age was not considered in Wednesday's announcement. And it should be noted that the "Jobs Bonus" is not the first incentive to be offered mature age workers. In fact it is in addition to the current "Mature Age Worker Tax Offset", where the maximum benefit per year to a mature aged worker is a princely $500.

Quite separately to the mandatory tweaking and selling of the "Jobs Bonus", the elephant in the room is the mammoth state based disincentives to hire mature workers. In NSW for instance, it is the NSW Workers Compensation Act 1987 (Section 1511A Retirement) which, when awarding damages for future economic loss due to deprivation or impairment of earning capacity or (in the case of an award of damages under the Compensation to Relatives Act) loss of expectation of financial support, directs the court to disregard any earning capacity of the injured worker after age 65.

Most states have retirement provisions which that restrict a worker's access to workers' compensation, in particular to income replacement payments when a worker reaches the age of 65. Once an injured worker reaches the age of 65 (the so-called "retirement age"), it is expected that the worker has access to other forms of income support such as the age pension or superannuation. Queensland is the only state in the Commonwealth that does not include a "retirement provision" or nominated age in its state Workers' Compensation Act 2003. Amen to that.

The stated rationale for cessation of workers compensation payments at 65 years is related to a notional retirement age, the eligibility for an aged pension or superannuation payments. The issue with this is that mature workers may want to remain in the paid workforce after age 65 or to volunteer after 65 years. Unless changes are made to Workers Compensation legislation, older Australians will no longer have coverage or access to workers compensation.

In stark contrast, when faced with its own an supply of unskilled or semi skilled mature aged unemployed and underemployed workers, Singapore went about solving the problem a whole lot differently to the Gillard government.

It created a long-term cash flow incentive for employers by reimbursing up to half of Singapore's equivalent of the Superannuation Guarantee Contributions (its contributions to the Central Provident Fund) so long as the mature aged person remained on the payroll. This program is called the "Special Employment Credit".

In the Republic of Singapore, employers contribute a percentage of an employee's salary into the Central Provident Fund (a national superannuation fund). The employer's contribution is a function of an employee's age. The older an employee is, the lower the employer's CPF contribution. In the case of a worker aged 45-50, the employer must pay 16% by way of CFP contributions. Under the SEC provisions, the employer would receive six-monthly reimbursements totaling 8% over the year, being half the employer's contributions. Quite separately, the employee makes his/her own CPF contribution, which for a 45-50 year old is 20% of his/her wage. This provision remains unchanged.

Singapore introduced the Special Employment Credit as part of the 2011 Budget.

The SEC principally targets a rise in the employability of older low-wage Singaporeans. It complements other measures to boost the employment rate of older workers, such as the existing bias in the CPF rates that favour older workers being hired (now there's an idea Mr. Treasurer?)

Singapore government reports last month revealed that than 52,000 employers were expected to receive a total of about S$19 (A$14.6) million that month under the SEC. 
The amount is for employing about a whopping 171,000 older low-wage Singaporeans in the second half of 2011. The program is to cost $100 million over 3 years.

Australia's population is 4.4 times that of Singapore. Using Singapore's SEC as a model, it is not unrealistic to expect up to 750,000 older Australians could find a new job this way. Of course if would help enormously if the Gillard government stopped cooking the jobless books as has been the custom of all governments.The SEC scheme was enhanced in Singapore's 2012 Budget to enable an even bigger pool of older workers to qualify.