Government's mature age push fades to grey

According to the 2010 Intergenerational Report, the worst-case scenario is that by 2050, government spending will outstrip revenue by 2.75 per cent of GDP, with half of all government-spending going towards health care and the aged pension.

We currently spend $121 billion on healthcare. That will blow out to about $200 billion, which will be paid for by our kids and grand kids. Where's the generational equity in that?

On current retirement projections, demand for employees in the service industry will outstrip supply around 2020. People say to me, 'so what? We have lots of people, lots of migrants and more are arriving everyday'. That's true but one third of them leave over a five-year period. Not all of them want to work in the service industry and many simply don't have the language skills or training.

As the Boomer 'Pig in the Python' demographic passes through the workforce, it will leave organisations bereft of workers. The principle economic way to attract workers is to increase wages. So younger people will attract a premium wage (about time I hear some say), as long as they want to work in that industry. Many don't but that's another story.

I've included three direct effects of demographic contraction.

Wage inflation

For the last 20 years, Australia has been very successful in keeping wages from breaking out. Yet this time around it will be employers not workers behind the push to increase salaries to hunt for talent. Wage inflation by sector will rise and it will push up the CPI. How much? We don't know but an increase of two percentage points would not be far off. Inflation is a cancer that kills savings and value.

Pirating

Pirating is fun (avast!) until someone poaches your head of IT or someone who is the 'go to' person. If recruiters and employers can't get the people they need, they pirate. Over the next 20 years just as the post war generation of nurses and aged care professionals retire, poaching will become an epidemic with a sense of desperation about it.

Offshoring

Put your managing directors hat on, pull out the SWOT plan and look in to the future. He or she can see labour shortages. Not so in Thailand, Singapore, India or China. Because the Government has failed to correctly design and implement it's Experience+ suite of programs, most employers are still at the 1970s default position – older workers are a risk, not an asset.

The services and manufacturing sectors can see the writing on the wall. Not only can they access cheap labour by going offshore but in a SWOT analysis, they can see increased costs for the workers they can attract here.