Volume 10 – Issue 3 – August 2014

SPECIAL ISSUE Ageing Population Sir Frank Holmes Memorial Lecture 2014 – Age Discrimination in the Workplace Learning from Regulatory Disasters Judith Davey 42 Julia Black 3 Later Life in Rental Housing: Adapting to an Ageing Society: current New Zealand issues the need for cultural change Sally Keeling 49 Simon Biggs 12 Living Alone as a Lifestyle of Older Focusing on the Future: a summary and People in New Zealand: policy implications critique of the 2013 retirement income report Peggy Koopman-Boyden and Sheena Moosa 54 Robert Stephens 17 Old and Poor or Old and Cared for? Decumulation 101: the basics of drawing Some policy reflections on data from down capital in retirement the first two waves of NZLSA Geoff Rashbrooke 23 Charles Waldegrave 60 What Has New Zealand’s Retirement Policy Improving New Zealand Water Governance: Framework to Offer the International Debate? challenges and recommendations Susan St John 29 Elizabeth Eppel 66 Labour Force Participation and Well-being among Older New Zealanders Michael P. Cameron and Matthew Roskruge 35 Editorial Note Population ageing is one of the most significant As Simon Biggs points out, ‘everyone wants to issues facing New Zealand in the coming decades. live a long life, but no one wants to grow old’. Lasting

Volume 10 – Issue 3 – August 2014 Its implications are crucial for government and solutions to the challenges of population ageing must all policy-making bodies. It will affect individuals, be based on intergenerational complementarity, on Policy Quarterly (PQ) is targeted at readers households, communities, businesses and voluntary progressive and well-based policies which balance in the public sector, including politicians and organisations. An understanding of how ageing relates the opportunities and risks of an ageing world. their staff, public servants and a wide variety of to other social and economic changes in New Zealand The first article in this issue of Policy Quarterly professions, together with others interested in public issues. Its length and style are intended and an in-depth knowledge of behavioural factors that is the text of the 2014 Sir Frank Holmes Memorial to make the journal accessible to busy readers. promote positive ageing is fundamental to successful Lecture, presented annually by the IGPS. The The journal welcomes contributions of adjustment as the age composition of the population presenter this year was Julia Black, professor of law about 4,000 words, written on any topic changes. The nine articles on ageing in this issue of and pro-director for research at the London School of relating to governance, public policy and Policy Quarterly all contribute to this understanding Economics and Political Science. Her title is ‘Learning management. Articles submitted will be and the ‘cultural adaptation’ called for by Simon from Regulatory Disasters’. For New Zealand readers reviewed by members of the journal’s Editorial Biggs, who visited the Institute for Governance and the mention of ‘regulatory disasters’ immediately Board and/or by selected reviewers, depending Policy Studies (IGPS) in February this year. He points calls to mind events such as the Pike River mine on the topic. Although issues will not usually have single themes, special issues may be out that the challenge of ageing is facing both mature explosion in 2010 and the ‘leaky buildings’ built and published from time to time on specific or and emerging economies and exercising the minds of identified in the 1990s and 2000s. In her article general themes, perhaps to mark significant policy makers throughout the world. Professor Black also draws on the Macondo oil spill events. In such cases, and on other occasions, Three articles relate to retirement income in the Gulf of Mexico, the explosion at the Buncefield contributions may be invited from particular policies. Bob Stephens presents a critique of the 2013 tank storage depot in the south of England, and people. retirement income policy review, looking to the future the 2008 collapse of the Royal Bank of Scotland, a Subscriptions: The journal is available in PDF and exploring the options for keeping present policies contributor to and casualty of the global financial format on the Institute for Governance and sustainable. He calls for more public discussion crisis. Each of these cases revealed regulatory Policy Studies (IGPS) website: http://igps. victoria.ac.nz/publications/publications/list/10. around this issue. Geoff Rashbrooke focuses on the failures often stemming from tensions within and Readers who wish to receive it by email should decumulation phase, which will become especially between different approaches to regulatory regimes. register as PQ subscribers [email protected]. important as KiwiSaver accounts mature. How will Detailed, prescriptive regulation can quickly become This service is free. people use their lump sums and what is the role of outdated, but performance-based or outcomes- For all subscription and membership public policy in this area? Susan St. John places the focused regimes require a supporting scaffolding enquiries please e-mail [email protected] or New Zealand retirement income support system in an of guidance. From her case studies, the author post to Institute for Governance and Policy international context and finds it has much to offer, identifies key lessons for regulators and those who Studies, P.O. Box 600, Wellington. Electronic Access: The IGPS directs despite its flaws. oversee them. interested individuals to its website: www.igps. Workforce ageing is an aspect of population ageing The final article, from Elizabeth Eppel, was held victoria.ac.nz where details of the Institute’s and also calls for policy responses. Michael Cameron over from the previous issue of Policy Quarterly to publications and upcoming events can be and Matthew Roskruge analyse the trends, pointing to account for the government gazetting on 4 July of found. significant increases in labour force participation by amendments to the 2011 National Policy Statement Permission: In the interest of promoting debate older New Zealanders, especially compared to other for Fresh Water, which came into effect on 1 August. and wider dissemination, the IGPS encourages OECD countries. Age discrimination can be a barrier In it Elizabeth addresses the difference between use of all or part of the papers appearing in to such participation and Judith Davey, drawing on what she calls ‘good governance’ and ‘effective PQ, where there is no element of commercial gain. Appropriate acknowledgement of both the impressions of employers and other informants, governance’, where the latter depends on bringing author and source should be made in all cases. finds that legislation cannot combat it without other a complexity lens to the issue of designing and The IGPS retains copyright. Please direct action. enacting policy. Water governance is such a case. requests for permission to reprint articles from Housing is a third area in which population ageing There are multi-layered and complex institutional this publication to [email protected]. will make its mark. Sally Keeling cites research which arenas for decision-making, and interacting and Editors: Jonathan Boston and Bill Ryan indicates a growing demand for rental accommodation, interdependent complex systems, and the entire Guest Editor: Judith Davey and the disadvantages experienced by older renters framework must be adaptive and sustainable. She Editorial Board: Guy Beatson, David Bromell, when policies assume that home ownership is the then explores the conditions that are necessary for Valentina Dinica, Don Gray, Gerald Minnee, Mike Reid and Andrea Schollmann. norm. Living alone has become a common lifestyle effective governance, concluding that New Zealand ISSN: 2324-1098 (Print) for older people and increasing numbers among has some distance yet to go in order to achieve them. ISSN: 2324-1101 (Online) oncoming cohorts. Drawing on interviews with older She argues that lessons learned elsewhere point Volume 10, Issue 3 – August 2014 people, Peggy Koopman-Boyden reports on what particularly to the need for improved collaboration, Copy Editor: Rachel Barrowman makes their lives meaningful and how their situation more adaptive learning, and more comprehensive, Design & Layout: Aleck Yee could be improved. Housing tenure is also one of open and transparent information, particularly Cover Design: Aleck Yee/Alltex Design the areas covered by the New Zealand Longitudinal pertaining to actual outcomes. The fresh water Production: Alltex Design Study of Ageing, alongside income, poverty, asset problem demands effective governance processes Proof Reader: Vic Lipski accumulation and well-being. Charles Waldegrave, in compatible with its complexity. his article, points out the fundamental influence of policy in these areas, linking with some of the points Judith Davey and Bill Ryan raised by Stephens. Sir Frank Holmes Memorial Lecture 2014

Julia Black

Learning from Regulatory

practices led to significant Disasters losses for home owners caused by leaky buildings. In 2010 an explosion in the Pike River mine in New Zealand Estimates of the losses range killed 29 people, and, on the other side of the world, a to as high as $NZ11.3bn blowout at the Macondo oil well killed 11 people and caused (PricewaterhouseCoopers, major environmental damage as four million barrels of oil 2009). spilled into the Gulf of Mexico. In 2005 a cloud of petrol These disastrous events from opposite sides of the globe seem to be disparate: vapour spread over two major motorways early on a Sunday some are systemic failures across an industry, others are single events; some morning after an explosion at the Buncefield storage depot are low-probability, high-impact events, in the South of England, which if it had happened at any others high-probability and low-impact if measured as the impact per individual other time could have caused significant loss of life. In 2008 affected at a single point in time, but the Royal Bank of Scotland (RBS), one of the UK’s largest high-impact if assessed on an aggregate basis across a number of individuals banks, was rescued from collapse by a government bail-out and a period of time. What they have in common is that they are all regulatory of £46bn, a contributor to and casualty of the global financial disasters: a catastrophic event or series crisis. In the 1990s to early 2000s poor New Zealand building of events which have significantly harmful impacts on the life, health or financial well-being of individuals or the Julia Black is Professor of Law and Pro Director for Research at the London School of Economics and environment, caused, at least in part, by Political Science. a failure in the design and/or operation

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 3 Learning from Regulatory Disasters of the regulatory regime put in place to indeed need not be confined to the state persuading political overseers of the prevent their occurrence. at all: they result from the unintended need for change. Regulatory systems Regulatory disasters can be a particular and unforeseen consequences of the can have a significant number of ‘latent’ form of policy disaster. Policy disasters design and/or operation of a regulatory failures which only become apparent have been defined as the disastrous system and its interactions with other on the occurrence of a particular major unintended consequences which occur as systems. As such, they can arise from event, such as explosion or financial the direct consequence of poor intentional poor decisions by politicians in the design collapse, or through the recognition choices by top political decision-makers of the regulatory regime and/or political of an accumulation of a number of (Dunleavy, 1995). Regulatory disasters influences on its operation, and/or poor smaller events, such as individual may also be seen as a particularly acute decisions and practices by regulatory deaths, smaller-scale pollution events or form of a policy blunder. King and Crewe, officials themselves within a system that individual financial losses. These are the for example, define a ‘policy blunder’ as: may be either well or poorly designed. disasters ‘which are waiting to happen’. Regulation, or regulatory governance, is Other disasters were not foreseen, but an episode in which a government the organised attempt to manage risks or neither may they have been reasonably adopts a particular course of action behaviour in order to achieve a publicly- foreseeable; or they involve ‘black swan’ in order to achieve one or more stated objective or set of objectives; events – what had been seen as low- objectives, and as a result largely or a regulatory system consists of the probability albeit high-impact events wholly of its own mistakes, either (sometimes shifting) set of interrelated (Taleb, 2007). Nonetheless, the inquiries that often follow a disaster, even if it is a ‘black swan’ event, often reveal systemic Although regulatory disasters often problems within the regime which have occur in apparently unrelated domains thus far gone unnoticed by regulators, or unheeded by key policy actors. or countries, they can in fact contain Analysing the causes and nature of regulatory disasters also enables us to lessons for all regulators, ... understand more about the nature of regulation itself. Although regulatory disasters often occur in apparently fails completely to achieve those actors who are engaged in such attempts unrelated domains or countries, they can objectives or does achieve them and their interactions with one another in fact contain lessons for all regulators, but at a totally disproportionate and the dynamic institutional and for the regulatory regimes share a cost, or else does achieve them but organisational environment in which they common set of elements which, through contrives at the same time to cause sit. Thus, regulatory disasters also differ their differential configuration and a significant amount of ‘collateral from public service delivery disasters, interaction, create the unique dynamics damage’ in the form of unintended as they do not involve the delivery of of that regime. In the regulatory disasters or undesired consequences. (King services to the public directly organised analysed here, these manifest themselves and Crewe, 2014, p.4) by a government department, agency or as six contributory causes, operating authority; or that are provided on behalf alone or together: However, the scale of their of, financed and regulated by government • the incentives on individuals or consequences means that ‘regulatory (contrast Dunleavy et al., 2010) unless groups; disasters’ are more than just ‘policy those disasters arise at least in part from • the organisational dynamics of blunders’. They include disasters caused failures in the design and/or operation of regulators and regulated operators by ‘judgement calls’ as well as poor design the regulatory system to which that public and the complexity of the regulatory and implementation, and, as used here, service, such as a hospital, is subject. system; ‘regulatory disasters’ deliberately excludes Regulatory disasters are horrendous • weaknesses, ambiguities and ‘political disasters’ – those that are for those affected by them. Because of that, contradictions in the regulatory disasters for the reputation or continued we have an obligation to learn as much strategies adopted; existence in power of the politicians from them as we can, notwithstanding • misunderstandings of the problem or regulators involved. Many of the all the well-known challenges related to and the potential solutions; regulatory disasters focused on here are policy and organisational learning. For • problems with communication about also political disasters, but a policy which regulators, probing the reasons for the the conduct expected, or conflicting is purely or mainly a disaster in political disaster, even if it occurred in another messages; terms is not included. country, or in a different regulatory • trust and accountability structures. Regulatory disasters are also distinct domain, can provide insights for the The article focuses on five distinct from policy disasters in that they occur in evaluation of their own systems. They and unrelated regulatory disasters: the a particular sub-field of public policy, and can also provide useful leverage for construction of ‘leaky buildings’ in New

Page 4 – Policy Quarterly – Volume 10, Issue 3 – August 2014 Zealand in the late 1990s–2000s; the Commission on the Pike River Coal both regulators and regulated operators explosion at the Buncefield chemical Mine Tragedy, 2012 (hereafter Pike (regulatees) have played a significant plant in the UK in 2005; the events River report), p.12). Conflicts of interest role in all the regulatory disasters leading up to the bail-out of the Royal can exist within regulators as well as analysed here, as have the dynamics of Bank of Scotland in 2008; the Macondo regulated firms. In the case of Deepwater the interrelationships between them. The oil well blowout at the Deepwater Horizon, regulators were responsible internal dynamics of organisations are in Horizon oil rig in the Gulf of Mexico in both for awarding licences for deep water turn affected by their broader institutional 2010; and the Pike River mining tragedy drilling and collecting the associated context. For firms this is usually the in New Zealand, also in 2010.1 These are royalties, and for ensuring safety and markets in which they are operating. chosen because they are uncontroversial environmental protections. The drive for For regulators it comprises principally examples of regulatory disasters: events royalty income was such that a culture their legal mandate and powers, their having significantly adverse impacts on of revenue production dominated safety governance and accountability structures, human health, the financial position or or environmental concerns, to the extent the political context and their informal the environment which arose from the that some offices developed a practice of and formal relationships with other design and operation of a regulatory taking ‘benefits in kind’ instead of royalties, regulatory actors. regime intended to manage the very leading to serious charges of abuse of That context can drive organisational risks which materialised. They also have the advantage that each was subject to extensive investigation by an independent ... in the case of ... ‘leaky buildings’ body established specifically to inquire into the causes of the disaster, so providing disaster, the Hunn report found that ... a wealth of factual information. While there are always inherent biases in any the changing practices within the market investigation, those which followed each of these disasters has not been significantly meant that builders were no longer criticised as biased or ‘captured’ by any overseen by professionals .... particular interest.

The incentives on individuals or groups government authority and even criminal dynamics and priorities in direct ways. In the aftermath of any disaster there misconduct (National Commission on In the case of Pike River, for example, are normally calls from politicians and the BP Deepwater Horizon Oil Spill the report found that while the ‘drive for the public for individual liability to be and Offshore Drilling (2011) (hereafter production’ was a normal feature of coal imposed; for some ‘heads to roll’. However, Deepwater Horizon report), p.77).2 In mining, Pike River was in a particularly the role of individuals in causing or addition, individual pay and reward stressed economic situation as the contributing to regulatory disasters is not schemes were linked to the speed with company was in ‘start up’ mode: it had straightforward. In some cases individuals which officials issued licences, distorting only one mine, which was producing may be a direct cause of a failure: for balanced decision-making, particularly far less than had been forecast, and it example, ‘rogue traders’ such as Nick with respect to environmental impacts. was seeking to gain market credibility in Leeson, whose trading activities brought (ibid., p.82). As many regulatory activities order to raise capital (Pike River report, down Barings Bank in 1995. However, are performed through individuals, it is p.12). In such circumstances, directors there is a complex interaction between not surprising that the decisions, actions and executive managers paid insufficient individuals and the organisational context and inactions of individuals play a role attention to health and safety risks. The in which they are operating, which make in producing regulatory disasters. But market context can also have a systemic separating out individual action difficult. to focus on individuals alone is to miss effect across an industry, with significant In the regulatory disasters analysed here, the significance of how their actions implications for how a regulatory regime individuals are often the proximate cause, are governed by and interact with the operates in practice. For example, in the but their actions are only an element broader organisational and institutional case of New Zealand’s ‘leaky buildings’ in a series of interactions or events context in which they are situated. disaster, the Hunn report found that skill contributing to the disaster. levels in the building sector had been In particular, the organisational Organisational dynamics, institutional declining, and that the changing practices context can produce conflicting incentives context and system complexity within the market meant that builders which affect individual behaviour. The Organisations are mechanisms which were no longer overseen by professionals, Pike River report found that individuals translate individual actions into collective such as surveyors and architects, as they in the workforce were operating in action by enabling them to be sustained had been in the past (Hunn, 2002, p.9). a context in which production was over time (Reed, 2003). The organisational For regulators, it is the political and more important than safety (Royal systems, processes and dynamics of legal context which has most bearing on

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 5 Learning from Regulatory Disasters their organisational structures, processes regulatory disasters arising from the on how the regulator interprets it mandate and decision-making. Often the legal extraction industry (mining, oil drilling) and uses its powers. In the case of the mandate and powers that regulators have that the conflicts of interest created by MMS, it tried more than once to amend is deficient in one or more ways. In the the government’s interests in mining or the regulatory provisions to introduce the case of Pike River, the legal framework for drilling for natural resources can override requirement for a safety case and other health and safety regulation was criticised its role in preserving the environment or reforms, but was continually blocked as too fragmented: those who issued making decisions about health and safety by industry, Congress and the Office of licences to mine were not mandated to (Pike River report, vol.2, p.267; Deepwater Management and Budget (Deepwater look at health and safety, so licences to Horizon report, p.72). Horizon report, pp.71-3). In the case of mine were given without any scrutiny of Legislators also impose a business leaky buildings, the Hunn report stated health and safety. The regime may not model on regulators through their that: ‘Some territorial authorities and include all of the risks that the activity decisions on funding. Those funded building certifiers hold the view that the poses: in the case of the Buncefield directly from government are prey to cuts certification process is constrained by explosion, the report found that under in resources, which has an obvious impact a desire expressed by the BIA [Building the UK regulatory regime, societal risks on their ability to perform their role.3 Industry Authority] to building officials (such as to the health and safety of those The report to the president on Deepwater that any change to the process must avoid putting inflationary pressure on building costs.’ Overall, it concluded that ... a striking feature of all the regulatory political ‘influence may be compromising standards’ (Hunn report, p.19). In the UK, disasters analysed here is the central although the Financial Services Authority role played by failures of governance and (FSA) had a broad legal mandate and a wide set of powers to regulate banks and leadership within organisations ... other financial institutions, the report into the failure of the Royal Bank of Scotland found that the FSA had felt constrained from intervening too closely in RBS’s living in the vicinity of the site) were not Horizon concluded that the MMS had to business model by politicians’ ambitions taken into account in the land use and pursue safety regulation on a ‘starvation to preserve the City of London’s position planning decisions made with respect to diet’ due to Congress’s unwillingness to as an international financial centre (FSA, high-hazard sites. The legal mandate may grant it appropriate resources (Deepwater 2011, p.262). In the United States, royalty also be such that it creates significant Horizon report, p.72). In the case of income from oil exploration was a highly conflicts of interest for the regulator. Pike River, the government had reduced lucrative source of revenue;4 in such a In the case of the Deepwater Horizon funding to the inspectorate and merged it context, industry’s voice was allowed disaster, the Minerals Management Service with the broader Department of Labour. to frustrate attempts by the MMS to (MMS) was responsible for licensing and As a result, there were only two mining enhance regulation of their activities and collecting royalties and for environmental inspectors for the whole of New Zealand. the agency was never granted the political and health and safety regulation, and But business models can be imposed in autonomy to resist them (Deepwater operated in a political context in which other ways. Both environmental and Horizon report, ch.3). oil exploration, and preserving the health and safety regulators in the UK, for While the political and legal context royalties from that exploration, were the example, are under a legal requirement has a role to play in shaping organisational dominant concerns (Deepwater Horizon to recover the costs of their inspections. processes, cultures and decision-making, report, ch.3). Conflicting incentives and The report into the Buncefield explosion a striking feature of all the regulatory objectives in legal mandates often stem found that the legal requirement to disasters analysed here is the central role from the political compromises brokered recover costs ‘can have an unwanted played by failures of governance and between conflicting parties which effect upon regulatory activities and the leadership within organisations, in both are then embodied in the governing relationship between the [regulators] regulators and regulated firms. Critical are legislation. As the report to the president and duty-holders’ and ‘induce tensions the skills and training of personnel, the noted, ‘From birth, MMS had a built-in in the relationship with site operators’ resources of the organisation, weaknesses incentive to promote offshore drilling (Buncefield Major Incident Investigation in leadership, and governance, including in sharp tension with its mandate to Board, 2012 (hereafter Buncefield report), failures to manage risks strategically. ensure safe drilling and environmental p.66). Also striking are the consistent failures protection’ (ibid., p.56). Furthermore, Even where the legal mandate is clear of organisations, particularly regulatory governments themselves can have vested and a regulator has a full range of powers, organisations, to coordinate in the interests which conflict with other goals: the political context and accountability operation of the regulatory system, it is a notable theme throughout the structures can have a significant impact

Page 6 – Policy Quarterly – Volume 10, Issue 3 – August 2014 failures which are exacerbated the more generalist is within the organisation: one into the generalist health and safety complex the system. feature of Pike River was that the line inspectorate, which was itself part of With respect to internal failings of managers were generalists and so did a much larger Department of Labour, organisations, there are four central not understand how to inspect mines, meant that the department did not focus findings which are common to both even limiting the travel budgets of the sufficiently on health and safety issues regulators and regulated operators. inspectors to inspect mines in the North (Pike River report, p.29). First, and most obviously, culture Island on the basis that the resources Fourthly, organisations often take the matters. Organisations are internally came out of the South Island budget path of least resistance, and as a result can complex and informal norms often (Pike River report,vol.2, p.277). fail to manage risks strategically. In the dominate formal rules in the way Thirdly, organisational failures usually case of major hazard regulation (which activities are carried out and decisions come from the top. A central finding is the for these purposes is taken to include are made. As a result, safety rules can be failure of leadership, in both regulators financial supervision of systemically overridden when employees think they and regulated firms. For example, in the important banks), attention can focus are unnecessary, as in Pike River (Pike case of Pike River the investigation found more on the events that are ‘happening River report, p.19). Or the culture drives that ‘The board did not provide effective here and now’ than on risks that events decisions. In the case of the MMS, for health and safety leadership and protect ‘may happen in the future’. The board example, environmental scientists within MMS stated that their managers believed that all environmental impact assessments ... inter-organisational failures between should result in a ‘green light’ for drilling (Deepwater Horizon report, p.82). regulators can be as significant as internal Secondly, the training, skills and expertise of personnel matters: failures in regulators and regulatees in organisations may simply lack people with appropriate expertise. This is a contributing to regulatory disasters [as common feature in all the disasters, but was] in the case of Pike River ... it is notable that lack of training and expertise is often a more striking feature of regulators than it is of regulatees. This the workforce from harm’ (Pike River report into the supervision of RBS is frequently due to resources: disparities report, p.18; see also Hutter, 2001). The found that the board focused more on in pay between the regulator and industry, necessary information simply was lost as legacy issues and retail mis-selling which which makes recruitment difficult (see, issues moved up the organisation, and demanded immediate attention, and as a for example, Pike River report, pp.29, as a result the board could not assess result did not pay attention to prudential vol.2, 274-5; FSA, 2011, p.24). However, or challenge assurances that had been risks, which were seen to be remote. In it can also be because those at the top of given to it by management. An analysis the context of more traditional major the organisation do not value specialist of the failures of the boards of financial hazard industries, the Buncefield report expertise, as in the case of the MMS in the institutions in the wake of the financial provided a useful reminder that United States (Deepwater Horizon report, crisis found exactly the same (Senior pp.77-8). Alternatively, organisations may Supervisors Group, 2009; OECD, 2009). Previous major incidents around have the expertise but those experts are Boards can also be distracted: in the case the world such as Texas City, not called upon to look at the appropriate of Pike River the board was distracted by Longford (SE Australia) and Piper problems, as in the case of the supervision the financial and production pressures Alpha remind us that the task of of major hazard chemical sites in the UK, that confronted the company; in the case controlling major hazard risks can where environmental specialists were not of RBS, by the gains to be made from the become insidiously subverted by called on at the appropriate times. The activities it was pursuing. Regulators can undue attention being paid to the Buncefield investigation also found that be equally distracted: in the case of the less organisationally demanding experts from different disciplines can find FSA, the board had focused most of its issues of occupational safety. it difficult to work together productively, attention on dealing with legacy issues (recommendation 22) and specialists may have little empathy or from the previous regime, and on retail time for generalists, all of which can lead and insurance regulation. Analysis of This is not a problem confined to to conflicts over priorities and oversights board minutes for the years leading up regulators: in the case of both RBS (Buncefield report, p.30). In contrast, to RBS’s rescue found that the board had and BP, neither focused adequately on generalists may disregard the calls for devoted very little time to considering high-impact, low-probability events resources made by specialists, as they prudential regulation issues (FSA, 2011, (Deepwater Horizon report; FSA, 2011; cannot see the need for them. The impact p.266). In the case of Pike River, the and see House of Commons Energy and this has depends on where the expert or absorption of the mining inspectorate Climate Committee, 2010, para 33).

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 7 Learning from Regulatory Disasters

The complexity of the regulatory its assessment of the site, delaying the the legislation to bring it up to date, this system can also be a key contributory ability of the environment regulator to had not occurred. As a result, the deep- element. In any regulatory system, ask the firm to address particular issues. water drilling techniques that the industry multiple regulators will often have to Although there was a memorandum of was using were in effect unregulated, interact, but for varying reasons fail to do understanding in place between the two as they were simply not covered by the so effectively, or even at all. As a result, regulators, there was ‘scant compliance’ relevant legislation (Deepwater Horizon inter-organisational failures between with it. Software incompatibility inhibited report, pp.71, 75). In the aftermath of regulators can be as significant as internal data sharing, and communication was the disaster the US government agreed to failures in regulators and regulatees in ‘more a case of “copying in” colleagues in adopt a system akin to that used in Norway contributing to regulatory disasters. For the other agency than proactive liaison’. and the UK, often referred to as ‘enforced example, in the case of Pike River the Very commonly, there is also a lack of self-regulation’ or management-based investigation found that each regulator clarity about which agency has lead regulation. In such systems, the safety involved interpreted its mandate narrowly responsibility for which issues (Buncefield systems and processes are not prescribed and did not share information with report, paras 55, 72, 99, 124-5). in legislation; rather, the legislation sets an overall objective, such as ‘a safe system of work’, and the duty holder has to present its In the case of New Zealand ... the Pike ‘safety case’ to the regulator for approval, setting out how it proposes to achieve that River commission argued that in translating objective. This system was introduced in the UK system for health and safety the UK as a result of the Robens Report in 1972 (Robens, 1972), and forms the regulation to the New Zealand context, basis of New Zealand’s health and safety regulation.5 It was widely praised by the US New Zealand implemented a ‘light’ version commission investigating the Deepwater of the system ... Horizon disaster as the best system to use, and has since been adopted there. The UK also reassured itself of the strength of the regime in a parliamentary review of the the other agencies involved (Pike River Finally, failures in oversight can regulation of offshore drilling in the UK report, vol.2, p.268). In the case of leaky contribute to the difficulties of system in the wake of Deepwater Horizon, set up buildings, the Hunn report found that split management: regulators can be subject to to see what lessons, if any, could be learned responsibilities for approving building performance or accountability measures from it for the UK (House of Commons consents and issuing certificates led to which impose conflicting priorities on Energy and Climate Change Committee, confusion about roles, responsibilities them, as with the MMS, or which are 2010). and processes (Hunn report, p.23). In incapable of identifying weaknesses as However, any strategy has an Achilles the case of Deepwater Horizon, the the regulator lacks the expertise to do so, heel. One of the striking things about overlapping jurisdictions of the MMS as in the case of Pike River, or does not the regulatory failures relating to the and the United States Coastguard led to see it as their role, as in the case of the supervision of banks and financial markets a requirement to continually renegotiate Building Industry Authority. in the UK, and mines and buildings in informal inter-agency agreements over New Zealand, is that each was an example, an extended period and in effect expand Regulatory strategies and techniques at least from a distance, of a textbook the MMS’s jurisdiction, contributing to At the outset, regulatory disasters were case of ‘new regulatory governance’ its under-resourcing (Deepwater Horizon differentiated from more general policy techniques (on the UK system see Black, report, p.76). disasters as they involved the failure 2012). Management-based regulation was Furthermore, the different mandates of a regulatory regime to manage the used in the case of both the regulation of regulators may lead them to have behaviour or risks the regime was created of the mining industry in New Zealand, differential priorities, which is a problem to manage in order to achieve a broadly- and the regulation and supervision of when they are meant to be jointly defined goal or set of goals. A wide array RBS (and other banks) in the UK. In regulating the same site or activity, of regulatory techniques can be used to the case of New Zealand, however, the particularly where each is operating a risk- achieve those goals, each with its own Pike River commission argued that in based system for allocating inspection strengths and vulnerabilities. Each of the translating the UK system for health and resources. For example, in the case of failures involved a different regulatory safety regulation to the New Zealand Buncefield, the site had a lower priority technique. In the case of Deepwater context, New Zealand implemented a for the Health and Safety Executive (HSE) Horizon, regulation was highly prescriptive ‘light’ version of the system which gave than it did for the Environment Agency. and expressed in legislation. Although the flexibility by focusing on the objectives As a result, the HSE was slow to complete regulator had pressed Congress to revise to be achieved, but failed to supplement

Page 8 – Policy Quarterly – Volume 10, Issue 3 – August 2014 this with sufficient guidance or even research on how to get regulated operators regulatory disasters as it does to any other prescription as to the minimum standards to comply with regulation, there is far less problem. necessary, or sufficient engagement of the on how regulators can assure themselves, Knowledge, ideas and understandings workforce in compiling the safety case and others, that operators are or are are critical in the context of risk (Pike River report, vol.2, p.252; see also not complying. However, a common regulation. As noted above, operational Independent Taskforce on Workplace feature across all the cases studied is poor drivers can be such that risks that are Health and Safety, 2013). Management- monitoring strategies. In the case of Pike known but considered low-probability, based regulation works well where River, for example, inspections were on- albeit high-impact, are ignored, not management’s incentives are sufficiently site, but did not involve wider audits of because they are not known about but aligned with the regulators’ goals; systems and processes, or assessments of because a combination of assumptions however, as the FSA’s supervision of RBS the firm’s culture. In the case of RBS, in about probabilities, understandings of showed, where they are not so aligned the contrast, oversight focused too much on impact and operational drivers means technique is vulnerable to failure. systems and processes and not enough they are not prioritised for attention. In the case of the building and mining on the business model. It was also partial, More problematic, perhaps, are the industries, New Zealand also pulled back focusing on some areas of risk, mainly risks which are not known about. Low from prescribing products or processes in favour of setting performance standards, more often referred to in the UK context Low risks ... may escape attention both as ‘outcomes-focused’ regulation. This strategy involves removing a great deal of in the design of the regulatory regime or prescription from the rules, while setting its operation because their cumulative overall goals to be achieved. The Pike River report found that in getting rid of impact is not known ... in that particular those provisions, the regulatory system lost what might be termed its ‘institutional regulatory regime. memory’. It commented: ‘The special rules and safeguards applicable to mining retail operations where there were known risks, in particular, may escape attention contained in the old law, based on many concerns, but not others, notably capital both in the design of the regulatory regime years of hard-won experience from past adequacy, where the risks were seen as or its operation because their cumulative tragedies, were swept away by the new more remote (and where the supervisors impact is not known, or at least not legislation, leaving mining operators had less experience) (FSA, 2011, p.242). recognised in that particular regulatory and mining inspectors in limbo’ (Pike Similarly, in Buncefield, the regulators regime. For example, the Buncefield River report, p.32). Performance-based were criticised for focusing on known report found that the UK’s regime for or outcomes-focused regulation places defects rather than taking a strategic review major hazard regulation of chemical sites significant demands on both regulators’ of all the control measures in place, and did not cover low risks which may have an and regulatees’ judgement and expertise. focusing on lagging rather than leading incremental impact. Nor did it recognise However, complex systems of detailed indicators. The report recommended societal risks, i.e. risks to those living near rules can be just as demanding to that there should be a ‘clear line of sight’ the site, as opposed to those working on implement, and have the additional between the inspection plans and the it (ibid., paras 146-7). While the report disadvantage of becoming easily strategic outcome sought’ (Buncefield recommended that planning decisions outdated, as in the case of the regulatory report, para 97, recommendation 6). should take account of societal risk, and regime for deep-water drilling in the US. the HSE is working on technical guidance These contrasting examples highlight the Knowledge, ideas and understandings on the issue, the UK government has yet care that has to be taken in designing a Regulation is a problem-based activity: to introduce such a requirement.6 Some rules-based system, to ensure that there ‘society’ in some form decides there risks are just unknown, however. The is the right combination of principles or is a problem, or that there is a risk of a explosion at Buncefield, for example, outcomes-focused norms and sufficient problem in the future, and policy makers was a consequence of the ignition of a ‘scaffolding’ through more detailed and regulators devise ways to address that large cloud of vapour which was formed guidance provisions to indicate to firms problem. But how we identify something as during the loss of petrol from a storage how to comply and assure themselves a problem is contingent on what we value tank. The circumstances which led to the and regulators that they have done so (and therefore what we think is under release of the vapour were predictable, but (Black, 2008). threat), and how we analyse problems and the consequences were not. The vapour A less commented-on regulatory create solutions for them is contingent on release generated much higher pressures technique, at least in the academic our knowledge and understanding of the than would normally have been expected literature, is the art of monitoring and world and our ideas of how it operates. from a vapour cloud explosion, and inspection. While there is considerable This applies to our understandings of exactly how or why the chemical reaction

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 9 Learning from Regulatory Disasters occurred was still unknown at the end of account ‘economic growth’ in the exercise 07, notwithstanding that relationships the investigation (ibid., paras 19, 32, 51). of their functions.7 had in the past been highly fractious. Similarly, in the case of RBS, and indeed Relationships with regulatees may also In its report into the failure of RBS the with respect to the global financial crisis become over-trusting, though this is always review team declared that the concept of more broadly, assumptions that had been a difficult issue to manage in practice. a regulatory dividend was ‘flawed’ and made as to how markets would react in Regulators may have long-standing ‘potentially dangerous’. It rewarded firms particular scenarios proved significantly relationships with certain regulated with less intensive supervision if they misplaced, with risk events that had been firms, particularly large-scale operators could demonstrate effective controls and anticipated to occur once in several lives who are geographically fixed (mining displayed a degree of cooperation with of the universe occurring every day. In operators, in contrast to container ships, the FSA ‘that ought to have been a non- this case the causes were social rather for example). Much research has found negotiable minimum’. It is worth noting than chemical, and it is a moot issue as to that regulators, either deliberately or less that ‘trust’ may be resource-driven, whether they could have been predicted consciously, seek to build cooperative however: the report also noted that the had different modelling techniques, and relationships with regulatees, and only to dividend may also have been awarded to a different understanding of markets, escalate enforcement action in response enable supervisors to manage conflicting pressures with limited resources (FSA, 2011, pp.257, 252). Although the analysis here examines Regulatory dynamics and potential each element in isolation, in reality points of failure Although the analysis here examines each each element interacts with the others element in isolation, in reality each element to produce the unique dynamics of any interacts with the others to produce the unique dynamics of any regulatory regime. regulatory regime. But while each disaster is in many ways distinct, there are some common sources of failure which are observable irrespective of the domain being regulated. In fact, the been used. Nonetheless, we cannot always to the attitude of the regulatee and/ points of failure are depressingly familiar, manage uncertainty: we cannot always or the scale of the incident (Ayres and and, most importantly, are common to prevent disasters arising from risks that Braithwaite, 1992). Although the US is both regulators and regulated operators. we know exist but about which we do not often distinguished from other countries Within organisations these are most have full knowledge; nor can we manage in this regard, it is worth noting that often inadequate training and skills of risks that we do not know about at all. relationships between the MMS and the front-line staff; conflicting incentives, operators were also close, in some cases or incentives which conflict with the Communication and trust overly so (Deepwater Horizon report, goals of the regulatory regime; and poor Finally, the last elements of regulatory p.77). In all the examples analysed here, leadership and management oversight. regimes which play a role in contributing the reports criticised the regulators for In addition poor internal coordination to disasters lie in the communication and being insufficiently interrogative of the and communication, for example trust (or lack thereof) that exist between information given to them by firms, too between different types of experts, and regulators themselves, and between slow to take action once problems were weak coordination between the different regulators and those they regulate. Across identified, or not having set out clearly regulators charged with managing the the regime, different regulatory actors may when more formal action would be taken system are all too common. send conflicting messages as to its goals. (Buncefield report, para 95; Hunn report, The disasters also illustrate the The Hunn report found, for example, p.21). particular points of weakness of different that the foreword to the guidance on In the case of RBS, regulators were regulatory techniques. For example, compliance with the Building Act stated simply too trusting. From mid-2006 prescriptive regulation can quickly that the aim of the act was to ‘minimise onwards the FSA’s supervisors assessed become outdated, but performance-based compliance costs’, but it was unclear firms against criteria relating to their or outcomes-focused regimes require whether this related to the administrative management and controls, and whether a supporting scaffolding of guidance. costs of compliance or to the overall cost they had dealt openly with the FSA. Management-based techniques need to of design and construction compliance On the basis of these assessments it ensure that the goals of the regulator (Hunn report, p.18). This is a particularly decided whether, and to what extent, really are embedded in firms. In industries pertinent observation for the UK, which a firm could benefit from a ‘regulatory characterised by low-probability, high- has recently introduced a requirement dividend’. The Royal Bank of Scotland impact events, they show that firms and for non-economic regulators to take into was given a regulatory dividend in 2006– regulators need to take care not to be

Page 10 – Policy Quarterly – Volume 10, Issue 3 – August 2014 overly distracted with managing the high- in each of these (Baldwin and Black, were the second highest source of revenues for the US government (Deepwater Horizon report, p.63). probability, low-impact events which are 2008). The analysis also suggests where 5 See http://www.mbie.govt.nz/pdf-library/what-we-do/ workplace-health-and-safety-reform/effective-regulatory- happening here and now. All the disasters those who oversee regulators should be framework.pdf. also illustrate the need for consistent looking for potential points of failure; 6 http://www.hse.gov.uk/landuseplanning/societalrisk.htm. 7 Deregulation Bill 2014, clause 61. communication, and the importance, and points to the varying ability that and difficulty, of managing trust within even independent regulators may possess and of the regulatory regime as a whole. to counter the pressures that politicians Acknowledgements In sum, they illustrate that regulators can place on them. But above all it shows This article was given as the Sir Frank have to be aware of and respond to that we need to learn from disasters, Holmes Memorial Lecture in April limitations of the capacity and attitude wherever they happen around the world. 2014 when the author was the Sir Frank of regulated firms; the weaknesses of In doing so we will not prevent them Holmes Visiting Professor of Public Policy their own organisational structures and from happening again, but we could at Victoria University of Wellington. I am processes; the pressures imposed by reduce their likelihood. grateful to those attending the lecture and the market, legal and political context participating in subsequent discussions 1 Note that the lecture on which this article is based also for their comments, and to Judy Kavanagh in which the regime is operating; the included examples from the Mid-Staffordshire hospital potential points of failure in the regulatory inquiry in the UK, but this is omitted here for reasons of and Peter Mumford for their comments. space. See Report of the Mid Staffordshire NHS Foundation All the usual responsibilities remain my techniques being used; knowledge and Trust Public Inquiry (2013) HC947. 2 For a full discussion of the regulatory environment see own. understandings of risks and markets; chapter 3. the role of communication and trust 3 See Deepwater Horizon report, chapter 3, for a discussion of the depletions of the MMS’s resources. throughout the regime; and changes 4 At the time the MMS was created royalties for oil drilling

References Ayres, I. and J. Braithwaite (1992) Really Responsive Regulation, Oxford: Independent Taskforce on Workplace Health and Safety (2013) Report of Oxford University Press the Independent Taskforce on Workplace Health and Safety in New Baldwin, R. and J. Black (2008) ‘Really responsive regulation’, Modern Zealand, Wellington Law Review, 71 (1), pp.59-94 King, A. and I. Crewe (2014) The Blunders of Our Governments, London: Black, J. (2008) ‘Forms and paradoxes of principles based regulation’, Oneworld Capital Markets Law Journal, 3 (4), available at http://eprints.lse. National Commission on the BP Deepwater Horizon Oil Spill and Offshore ac.uk/23103/1/WPS2008-13.pdf Drilling (2011) Deepwater: the gulf oil disaster and the future of Black, J. (2012) ‘Paradoxes and failures: “new governance” techniques offshore drilling, report to the president and the financial crisis’, Modern Law Review, 75 (6), pp.1037-63 OECD (2009) Corporate Governance and the Financial Crisis: key Buncefield Major Incident Investigation Board (2012) The Report findings and main messages, Paris: OECD of the Buncefield Major Incident Investigation Board into the PricewaterhouseCoopers (2009) Weathertightness: estimating the Policy and Procedures of the Health and Safety Executive’s and cost, Wellington: Department of Building and Housing, http://www. the Environment Agency’s role in regulating the activities on the dbh.govt.nz/UserFiles/File/News/WHRS/pdf/PWC-weathertightness- Buncefield site under COMAH Regulations, London estimating-cost-full-report.pdf Dunleavy, P. (1995) ‘Policy disasters: explaining the UK’s record’, Public Reed, M. (2003) ‘The agency/structure dilemma in organization theory: Policy and Administration, 10 (2), pp.52-70 open doors and brick walls’, in C. Knudsen and H. Tsoukas (eds), Dunleavy, P., J. Tinkler, C. Gilson and E. Towers (2010) ‘Understanding The Oxford Handbook on Organization Theory, Oxford: Oxford and preventing public service policy disasters’, LSE Public Policy University Press Group, available at http://www.academia.edu/2871538/ Robens, Lord (1972) Committee on Safety and Health at Work: report FSA (2011) The Failure of the Royal Bank of Scotland: Financial of the committee, London: Stationery Office Services Authority Board report, London: Financial Services Authority Royal Commission on the Pike River Coal Mine Tragedy (2012) Royal House of Commons Energy and Climate Change Committee (2010) UK Commission on the Pike River Coal Mine Tragedy, volume 1, Deepwater Drilling: implications of the Gulf of Mexico oil spill, HC Wellington 450-I, London: Stationery office Senior Supervisors Group (2008) Risk Management Lessons from the Hunn, D. (2002) Report of the Overview Group on the Weathertightness Global Banking Crisis of 2008 of Buildings to the Building Industry Authority, Wellington Taleb, N. (2007), Black Swan: the impact of the highly improbable, Hutter, B. (2001) Regulation and Risk: occupational health and safety London: Penguin on the railways, Oxford: Oxford University Press

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 11 Simon Biggs

Adapting to an Ageing Society the need for cultural change A demographic change, a task of cultural adaptation In 2050 the global population aged over 60 will reach two World Economic Forum billion, making this age group three times larger than it was claims, the task of addressing in 2000. This is a challenge that is facing both mature and global ageing is principally emerging economies. The debate on the future shape of a one of cultural adaptation, long life is one that is critical to social development in the the forms that adaptation 21st century and is increasingly exercising the minds of policy takes require critical makers throughout the world. The World Economic Forum consideration.

global risks group has now identified population ageing as Everyone wants to live a long life, no one one of the five top issues facing the world community in wants to grow old Much is now well known in terms of overall terms of material provision (Beard et al., 2012). If, as the demographic trends: people are living longer and the numbers of older people relative to younger ones is increasing Simon Biggs is Professor of Gerontology and Social Policy, sponsored by the Brotherhood of St Laurence, in the School of Social and Political Sciences, University of Melbourne, and was a visitor to (Bengtson and Lowenstein, 2003). In the Institute for Governance and Policy Studies in February 2014. other words, with the possible exception

Page 12 – Policy Quarterly – Volume 10, Issue 3 – August 2014 of some African states and parts of the focuses almost entirely on employment any transition in life priorities, replacing Russian Federation, we are moving, as a as the means of filling the additional recognition of differing life priorities with global trend, away from the ‘traditional’ years of a long life. This view appears to a denial of the special qualities that a long demographic triangle, with many younger have become increasingly entrenched life brings with it (Biggs, 2004; Calasanti and few older adults, to a column whereby following the global financial crisis, such and King, 2011; Dillaway and Byrnes, different age groups are becoming more that the European Union’s European 2009; Martinson and Halpern, 2011). or less equal in size (Bloom, 2011). In Year of Active Ageing and Solidarity There is emerging evidence that while many advanced economies the transition between Generations programme states: individuals desire continuity of identity, has largely been completed, although in ‘Empowering older people to age in this does not preclude discontinuity of emerging ones the speed of this transition good health and to contribute more age-related life priorities. A key element is happening at a much faster rate. actively to the labour market and to their of this approach draws not on neo- In addition, mature-aged individuals communities will help us cope with our liberal economics but on psychosocial are, generally speaking, richer and fitter demographic challenge in a way that is understandings of changing existential than preceding generations (Metz and fair and sustainable for all generations’ tasks that face adults as they grow older Underwood, 2005), and as a result are (European Union, 2012). Whether there (Tornstam, 2005; Dittmann-Kohli and developing lifestyles that reflect a mixture are jobs available and ageism can be Joop, 2007). A focus on a discontinuity of extended youthful activities and novel reduced in the workplace, is another of psychosocial priorities across the mature priorities. If one were to try to matter. It assumes that a new direction adult life course also raises the issue of encapsulate this as a cultural trend it may has been found which lies in extending the degree to which intergenerational be to say that ‘Everyone wants to live a working life and adopting a restricted agendas overlap, and suggests that a long life, but no one wants to grow old’. For societies to respond successfully, to make this transition work, they need ... evidence is emerging that many of the to engage in a series of tasks, including a re-design of our cities (World Health assumptions of the ‘more of the same’ solution Organisation, 2007), the extension of a healthy life (Olshansky et al., 2007), to population ageing may not stand up, at least intergenerational negotiation of age- in terms of age as a burden or as a source of related roles and expectations (Biggs and Lowenstein, 2011), and a re-evaluation resentment from younger age groups. of the contribution of older adults to the societies in which they live (Walker, 2009). In cultural and in policy terms, understanding of active and productive solution to generational solidarity may the question that arises is what sort of ageing that has been reduced to work and lie less in causing generations to compete adaptation should we be aiming for? What, work-like activities (Moulaert and Biggs, on the same territory as in developing in other words, might the relationship 2013). ‘Fair and sustainable’ here reflect complementary roles and relationships between life-course continuity and both the anxiety as well as the promise of (Biggs and Lowenstein, 2011). discontinuity be, and how is it reflected ‘intergenerational solidarity’ around jobs In fact, evidence is emerging that in wider social discourse on the purpose and pensions, that, as Kohli (2005) put many of the assumptions of the ‘more of of a long life? it, ‘In the twenty-first century, the class the same’ solution to population ageing conflict seems to be defunct and its place may not stand up, at least in terms of age Phase one: more of the same taken over by generational conflict’. as a burden or as a source of resentment In this context, the work of the World from younger age groups. For example, in Bank (1994) and the OECD (2006), plus Phase two: exploring difference and the private sphere, at least, generational the policy statements of numerous nation generational complementarity transfers tend to travel from older to states (see Commonwealth of Australia, In contrast to the ‘more of the same’ younger family members, even in later life 2010; European Union, 2012) show an approach, a number of writers have (Irwin, 1998). The OECD has noted that emerging international policy consensus. emphasised the discontinuous qualities in the public sphere there may be a form This consensus marks a shift away from of long-lived experience. The notion of fiscal generational altruism associated a holistic approach to the inclusion of of adaptation implies that there is a with large infrastructural investments, older adults, as reflected in the OECD’s qualitative as well as a quantitative where the contributors may not live report on ‘active ageing’ (OECD, 1998), to distinction to be made as the different long enough to receive the full benefit of a more restricted approach encapsulated generations become more equal in investments made (OECD, 2011). It has by the title of the seminal document Live demographic size. It has been argued that also been argued that it may be incorrect longer, Work Longer (OECD, 2006), which current policies attempt an erasure of to assume that continued working is the

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 13 Adapting to an Ageing Society: the need for cultural change solution to the fiscal costs of health – for from intergenerational rivalry and 2010); in other words, ‘It’s no longer a example, if 60% of tax revenue is raised towards measures that reinforce a life project to aid the elderly; it’s simply a fresh outside taxable income (Betts, 2014). course-based contract between citizens new plan to improve productivity.’ A more equitable solution may be to and the state. The question isn’t really that we increase a ‘longevity dividend’, whereby If the first phase of cultural don’t know what to do to save money ‘the extension of healthy life creates adaptation has been to fill a longer life around demographic change, but that the wealth for individuals and the nations in with the obligation to work, the second solutions are complex, requiring long- which they live’ (Olshansky et al., 2007). may be to discover the complementary term planning. They are rarely exciting This would include adopting policies that skills that different age groups bring to a and lack the brouhaha of ‘tough’ political extend healthy ageing though investment diverse number of settings and potential posturing. The list would include: a in prevention and medical innovation, contributions to society. shift to focus on prevention in health thus creating a longer period of healthy care rather than reactive intervention; working life. Further, it does not appear Sticks or carrots in social policy reducing cumulative disadvantage such that younger adults see their elders as a A further implication that follows from that social inequalities are addressed early burden. A number of studies are emerging this is what might be called a stick-versus- in the life course rather than allowing that indicate that younger adults do not carrot approach to workforce policy. If an accumulation of problems as time resent caring for older relatives; rather, the stick concerns removing benefits progresses; adopting policies that further they want the right work–life balance (for those relying on statutory pension emphasise community integration that allows it. Neither may younger eligibility) to force older people to look for rather than residential care; working a few years longer in workplaces designed for age diversity; creating facilitative Taken together these ... would facilitate the environments for social engagement through universal/age-friendly design; discovery of each age group’s contribution and business innovation to make age- to social well-being, and the development of friendly products at affordable prices. complementary rather than competitive relations Phase three: rediscovering whole life course priorities between those generations, in the workplace, in the If the first phase of adaptation has been marked by a ‘more of the same’ response family, in policy and in civil society. – filling the vacuum with priorities from elsewhere – and the second a facilitative and intergenerational response to the question of what to do with all those extra adults resent paying for others’ pensions work which may or may not be there or years, the third, which is only dimly visible and health; they just want the same be appropriate, then the carrot concerns on the horizon, may cause us to address commitment for themselves when their modifying workplaces to make them some fundamental questions around the time comes (Gentrans, 2006–2009; Azra more age-friendly. A number of studies purpose of a long life, the contribution and Kohli, 2008; Keck and Blome, 2008; have shown that this can be achieved by: of older adults and a re-shaping of the Komp and van Tilberg, 2010). Finally, the creating greater choice and flexibility life course as a whole. The signposts are longstanding ‘lump of labour’ fallacy that about transitions in and out of work already there if we wish to follow them. younger adult unemployment is linked (Taylor, 2006); enhancing the capacity of First would be to embrace the to retaining or recruiting older workers older workers through training, lifelong psychosocial discontinuities that occur as appears to have no empirical evidence to learning and anti-discrimination policies we age, rather than fear personal change. support it. In fact, reduced rates of youth (Seiki, Biggs and Sargent, 2012); making The mature half of adult life contains unemployment correlate positively with workplaces more attractive to both recruit an awareness that we are not, in fact, high levels of mature-age employment, and retain mature-age workers (Manninen, immortal and have a limited time on such that: ‘An exhaustive search found 2011); and adapting policies to facilitate this planet. This generates a set of new no evidence to support the theory in the new pathways and meanings associated existential priorities that are only just United States. In fact the evidence suggests with work and retirement (Sargent et al., becoming recognisable. It is not, then, that greater employment of older persons 2013). Perhaps most famously, the car simply that people wish they could spend leads to better outcomes for the young manufacturer BMW successfully adapted more time in the workplace. – reduced unemployment, increased their Bavarian production line to make Second would be a rediscovery of the employment and a higher wage’ (Munnell it mature-age friendly and found that importance of generational intelligence. and Wu, 2012). These arguments would productivity increased and absenteeism This would include the ability both tend to re-focus political debate away fell, as did the defect rate (Loch et al., to put oneself in the shoes of another

Page 14 – Policy Quarterly – Volume 10, Issue 3 – August 2014 generational group and to develop the for the question of meaning in later life multiple aspects of their identity, and in skills for sustained negotiation between that is not solely contingent on economic so doing permitting the emergence of life generational interests. As a first step it materialism. The ‘more of the same’ course-specific contributions to the wider might include a series of assessments of offered by productivist solutions cannot social good. The role of a progressive social contemporary frameworks to evaluate the answer these desires; rather, it seeks to policy would be to make available new degree to which they facilitate becoming suppress them. We should, given this social spaces in which these novel forms of conscious of self as part of a generation, historical turn in age relations, see what age-based identities can emerge. It would the relative ability to put oneself in the it can tell us about the human condition, rest on a critique not only of physical position of other generations, and the the ways we lead our lives and the kind of space, but of temporal relations such as relative ability to negotiate between futures we collectively desire. work-life balance across the life course generational positions. and the meanings attributed to different Taken together these two steps would The journey ahead life phases. Sustainable solutions, those facilitate the discovery of each age group’s If everybody really does want a long that can stand the test of time and respect contribution to social well-being, and the life, it is becoming clearer that few want the life priorities of different generational development of complementary rather to grow old as it is currently conceived. groups, can then be negotiated as each than competitive relations between those The task is of cultural adaptation to party recognises their own and the others’ generations, in the workplace, in the a society where the age groups are specific contribution. True cultural family, in policy and in civil society. We roughly equal in size and finding new innovation would lie in the facilitation of have glimpses of these alternative rhythms age-specific roles and contributions. new roles adapted to a long life, greater in the differences between between Then lasting solutions can be based on attention to generational interconnection, ‘youthful’ and ‘mature’ identities, in age- intergenerational complementarity. Policy and discovering new ways of releasing specific life tasks, changes in perspective, in should be less about work continuation age-specific potential. ‘gero-transcendence’ and in ‘generational versus reinvented retirement, and more intelligence’. They provide a starting point about allowing mature adults to develop

References Azra, C. and M. Kohli (2008) Pension Reform in Europe: politics, Dittmann-Kohli, F. and D. Joop (2007) ‘Self and life-management’, in J. policies and outcomes, 1st edn, New York: Routledge Bond (ed.), Ageing in Society, London: Sage Beard, J.R., S. Biggs, D.E. Bloom, L. Fried, P. Hogan, A. Kalache and European Union (2012) Europa: European Year of Active Ageing and S.J. Olshansky (2012) Global Population Ageing: peril or promise?, Solidarity Between Generations, http://europa.eu/ey2012 Geneva: World Economic Forum Gentrans (2006–09), ‘Baby Boomers’ Generational Transmissions in Bengtson, V.L. and A. Lowenstein (2003) Global Aging and Challenges to Finland’, the GENTRANS research project, University of Helsinki, data Families, Life Course and Aging, New York: Aldine de Gruyter collected by Statistics Finland, available at http://blogs.helsinki.fi/ Betts, K. (2014) The Ageing of the Australian Population: triumph or gentrans/ disaster?, report prepared for the Monash Centre for Population and Irwin, S. (1998) ‘Age, generation and inequality’, British Journal of Urban Research, http://artsonline.monash.edu.au/cpur/files/2014/04/ Sociology, 49 (2), pp.305-10 Ageing-of-the-Australian-population-4.pdf Keck, W. and A. Blome (2008) ‘Is there a generational cleavage in Biggs, S. (2004) ‘New ageism: age imperialism, personal experience Europe?’, in J. Alber, T. Fahey and C. Saraceno (eds), Handbook of and ageing policy’, in S.O. Daatland and S. Biggs (eds), Ageing and Quality of Life in the Enlarged European Union, 1st edn, London: Diversity: multiple pathways and cultural migrations, Bristol: Policy Routledge Press Kohli, M. (2005) ‘Generational changes and generational equity’, in Biggs, S. and A. Lowenstein (2011) Generational Intelligence: a critical M.L. Johnson (ed.), The Cambridge Handbook of Age and Ageing, approach to age relations, London, New York: Routledge Cambridge: Cambridge University Press Bloom, D.E. (2011) ‘7 billion and counting’, Science, 333 (6042), Komp, K. and T. van Tilburg (2010) ‘Ageing societies and the welfare pp.562-9 state: where the inter-generational contract is not breached’, Calasanti, T. and N. King (2011) ‘A feminist lens of the third age: refining International Journal of Ageing and Later Life, 5 (1), pp.7-11 the framework’, in D. Carr and C. Komp (eds), Gerontology in the Era Loch, C.H., F. Sting, N. Bauer and H. Mauermann (2010) ‘How BMW of the Third Age, New York: Springer, pp.67-85 is defusing the demographic time bomb’, Harvard Business Review, Commonwealth of Australia (2010) Intergenerational Report: Australia March 2050 future challenges, http://archive.treasury.gov.au/igr/igr2010/ Manninen, O. (2011) Work among the elderly, Kopijyvä (Tampere) report/pdf/IGR_2010.pdf Martinson, M. and J. Haplern (2011) ‘Ethical implications of the Dillaway, H.E. and M. Byrnes (2009) ‘Reconsidering successful promotion of elder volunteerism: a critical perspective’, Journal of aging: a call for renewed and expanded academic critiques and Aging Studies, 25 (4), pp.427-35 conceptualizations’, Journal of Applied Gerontology, 28 (6), pp.702- 22

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 15 Adapting to an Ageing Society: the need for cultural change

Metz, D. and M. Underwood (2005) Older, Richer, Fitter: identifying the Sargent, L.D., M.D. Lee, B. Martin and J. Zikic (2013) ‘Reinventing customer needs of Britain’s ageing population, London: Age Concern retirement: new pathways, new arrangements, new meanings’, England Human Relations, 66, pp.3-21 Moulaert, T. and S. Biggs (2013) ‘International and European policy on Seiki, A., S. Biggs and L. Sargent (2012) ‘Organizational adaptation and work and retirement: reinventing critical perspectives on active ageing human resource needs for an ageing population’, in J.R. Beard et and mature subjectivity’, in Human Relations, 66 (1), pp.23-44 al. (eds), Global Ageing: promise or peril?, Geneva: World Economic Munnell, A.H. and A.Y. Wu (2012) Will Delayed Retirement by the Baby Forum Boomers Lead to Higher Unemployment Among Younger Workers?, Taylor, P. (2006) ‘Work and employment: society’, Encyclopaedia of working paper, Chestnut Hill, MA: Center for Retirement Research, Gerontology, 2nd edn, Oxford: Elsevier Boston College Tornstam, L. (2005) Gerotranscendence: a developmental theory of OECD (1998) Maintaining Prosperity in an Ageing Society, Paris: OECD positive aging, New York: Springer OECD (2006) Live Longer, Work Longer, OECD Publishing (online) Walker, A. (2009) ‘Commentary: the emergence and application of OECD (2011) ‘Paying for the past, providing for the future: active aging in Eurpoe’, Journal of Aging and Social Policy, 21 (1), intergenerational solidarity’, background document for ministerial pp.75-93 meeting on social policy, Paris, 2–3 May, www.oecd.org/social/ World Bank (1994) Averting the Old-Age Crisis: policies to protect the ministerial old and promote growth, New York: Oxford University Press Olshansky, S.J., D. Perry, R.A. Miller and R.N. Butler (2007) ‘Pursuing World Health Organisation (2007) Global Age-friendly Cities: a guide, the longevity dividend: scientific goals for an aging world’, Annals of Geneva: WHO the New York Academy of Sciences, 1114, pp.11-3

Upcoming Events

Date Title Speaker Venue Friday 19 September Rural Ageing: Who Cares? Dr. Norah Keating, Professor of Victoria University of Wellington, Pipitea 12.30pm –1.30pm Human Ecology at the University of Campus, Old Government Buildings Alabama (Law School) GBLT2 All Welcome –No RSVP’s required

Friday 26 September A New Zealand perspective Dr. Geoff Bertram, Senior Associate Victoria University of Wellington, Pipitea 12.30pm –1.30pm on Thomas Piketty’s Capital with the IGPS Campus, Old Government Buildings (Law in the 21st century School) GBLT2 All Welcome –No RSVP’s required

Friday 17 October When Collaboration Goes Dr Jonathan Scott, Head of Centre Victoria University of Wellington, Pipitea 12.30pm –1.30pm Wrong – The Perverse for Strategy and Leadership, Campus, Old Government Buildings (Law Incentives of Community Reader in Entrepreneurship, School) GBLT2 Enterprise Teesside University (UK) All Welcome –No RSVP’s required

Friday 24 October Decolonisation and Dr. Geoff Bertram, Senior Associate Victoria University of Wellington, Pipitea 12.30pm –1.30pm Economic Performance in with the IGPS Campus, Rutherford House, RHLT2 Small Island Economies All Welcome –No RSVP’s required

Other speakers confirmed for 2014 include: Professor John Alford, Professor of Public Sector Management at the Australia and New Zealand School of Government (ANZSOG) Professor Howard Zehr, Co-director of the new Zehr Institute for Restorative Justice Professor Alan McConnell, Professor of Public Policy at Sydney University in the Department of Government and International Relations

For further information on IGPS Events visit our website http://igps.victoria.ac.nz/

Page 16 – Policy Quarterly – Volume 10, Issue 3 – August 2014 Robert Stephens

Focusing on the Future Retirement income policies cover both public provision via New Zealand a summary and critique Superannuation (NZS) and the veteran’s pension, and private provision through KiwiSaver, occupational pensions, and of the 2013 retirement private savings through bank deposits, shares etc. The split between public and private is not clean. Public provision is income report largely funded from current government revenue, predominantly taxation revenue Introduction on a pay-as-you-go basis, although the Every three years, under the New Zealand Superannuation New Zealand Superannuation Fund, built up from tax revenue (plus accumulated and Retirement Income Act 2001 the Commission for interest), is largely invested in the private sector and can be used to smooth NZS Financial Literacy and Retirement Income is required to expenditure flows (Guardians of the conduct a review of retirement incomes, to be submitted New Zealand Superannuation Fund, 2013). KiwiSaver is operated on a save- to the government. This article presents a summary and as-you-go basis to individual accounts, accumulating interest throughout discussion of their 2013 report, entitled Focusing on the the contribution period, based on Future. contributions from employees (who are automatically enrolled, with an opt-out The commission is funded by the New Zealanders’ financial literacy, provision), with employers required to government, but operates and comments ensuring that there is free and indepen- provide a matching contribution. There as an independent organisation. However, dent financial information available, and is a government tax offset of $1000 upon the terms for the triennial review are monitoring retirement villages legislation, enrolment in the scheme, plus a 50% tax determined by agreement between with the overall objective of improving the credit for contributions to a maximum the government of the day and the financial well-being of New Zealanders of $521 per annum. This government commission. Between reviews the throughout their lifetimes. contribution to KiwiSaver amounted to commission’s work focuses on improving $1.05 billion in 2012, or about 12% of the current costs of NZS (Dwyer, 2013). Robert Stephens is a Senior Associate of the Institute for Governance and Policy Studies. He was formerly Associate Professor in Public Policy at Victoria University. His research has been largely in Other private savings receive no tax the areas of social and public policy and tax reform. assistance, and the interest and dividends

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 17 Focusing on the Future: a summary and critique of the 2013 retirement income report from the private savings are taxed at the of pensioners, pension expenditure needs grants, disability support and rates individual’s personal income tax rate. and labour force participation rates. rebates. There is little analysis of how The 2013 report was able to draw Knowledge that most OECD countries these programmes developed, how they upon nine policy position papers and a have an average ratio of government link together, or their fiscal costs and variety of background papers prepared pension expenditure relative to national distributional effects. for the commission. Each paper related output of 9.3% in 2010, which exceeds the The report shows that two key to particular aspects of the terms of projected ratio in New Zealand of 7.2% features of retirement income policy – reference, as well as past reviews and in 2050, would have been vital contextual lack of compulsion for savings and a lack government responses to those reviews. material. NZS is affordable by international of policy to replicate working income The terms of reference, and the wider standards: the real issue is whether we levels into retirement – have persisted. context surrounding the report, were want to spend that amount of money on The report does not state the dominant discussed at a workshop held by the pensions. The level of expenditure is thus policy objective, which is the adequacy Institute of Governance and Policy a matter of intergenerational equity, and of income levels in retirement. Another Studies. The papers and workshop thus social (and political) choice, based feature overlooked is the constantly fed into a peer-reviewed discussion on what the alternative uses are for the changing use of the tax system in document. The final report was tabled in fiscal expenditure saved if the cost of NZS regard to savings, especially in regard Parliament in December 2013. is reduced. to occupational pensions: until 1986 contributions to superannuation funds received a tax reduction, but receipt of ... between 1986 and 2006 there were no tax the pension was taxed; between 1986 and 2006 there were no tax advantages advantages from entering occupational pensions from entering occupational pensions (leading to a substantial drop in (leading to a substantial drop in participation in participation in occupational pensions), but pension receipt was tax free; and post occupational pensions) ... 2006, KiwiSaver has provided a $1000 inducement to enter into voluntary schemes and a small tax reduction on contributions. Given the report’s The report Instead, the chapter concentrates on stress on intergenerational equity, some While the report is a stand-alone different scenarios based on the level analysis should have been made of the document, it really should be read in of future economic growth and social idiosyncratic nature of the winners conjunction with the background and cohesion, set in a context of likely and and losers from these different tax position papers. The majority of the report uncertain global economic, demographic, treatments. relates to future challenges facing both the health and societal trends. Economic The report provides eight objectives, private and public provision of retirement progress and a lack of social cohesion which cover the adequacy of income income, set in a global and historical could lead to a situation of winners support; ensuring financial and social context. Seventeen recommendations versus losers, while economic growth and well-being; personal responsibility for were made, covering NZS, KiwiSaver, social cohesion should lead to success. A managing of finances; risk-pooling if the New Zealand Superannuation Fund, failure in economic growth could result individuals live longer than they expect financial literacy, taxation, age-friendly in a fall in social cohesion or all of us to; a citizenship dividend based on housing and workplaces, and international struggling together. To be useful, this past contributions to society; lifetime pensions. The executive summary provides matrix needed to establish the framework consumption smoothing, due to a a succinct abstract of the report. for the remainder of the document. mismatch through the life cycle between needs and income; equity between The global context The framework for retirement income generations so that each generation pays The report’s chapter on the global context Much of this section of the report is a taxes roughly equivalent to its pension shows that most countries have developed descriptive history, along with information receipt; and the government having a distinctive programmes to provide income on the outcomes of the current framework sound fiscal position that can permit in retirement, with different emphasis on for older New Zealanders. One interesting payments of NZS. While the report the three tiers of pension income – with feature is the wide range of programmes identifies the need to ‘find a balance government provision of a universal in existence for pensioners, ranging from between the [eight] objectives that is superannuation at age 65, occupational NZS and KiwiSaver to the SuperGold both politically and fiscally sustainable pensions and voluntary savings. Card, the means-tested assistance of the for a long period’ (p.18), it does not cover The chapter provides limited Community Services Card, housing, the trade-offs between these objectives. comparative data on trends in the number transport and mobility assistance, special For example, improving the adequacy of

Page 18 – Policy Quarterly – Volume 10, Issue 3 – August 2014 income comes at a fiscal cost; an adequate Mäori population be to support an ageing recommendation of increasing the age NZS reduces the need for personal European population, especially if the of eligibility as longevity increases. By responsibility to provide adequate current differential in income and living international standards the proposed rate savings; the baby-boomer bubble reduces standards continues? of increase in the age of eligibility is very equity between generations, as current slow, and starting at a far later date than pensioners have paid less in tax than Fairness of the system for most of the OECD: the policy work pension receipt, with the reverse for future The report states that the key achievement has been done, most of the population are generations (although the New Zealand of the pension system is social inclusion familiar with the population ageing issues, Superannuation Fund was designed to and cohesion. A universal system and the slow rate of change in the age of offset this imbalance). overcomes the stigma from targeting; eligibility means that fiscal savings will be History has shown how politicians reduces administration costs due to relatively low. This recommendation seems have constantly meddled with the policy complex and ever-changing eligibility to stem from critical responses to previous, framework and parameters, probably rules; stops gaming of the pension through more speedy age-raising recommendations, because of the simplicity of NZS and the formation of trusts and hiding as well as political expediency. KiwiSaver. Past retirement income reports income; and encourages the continuation have not led to certainty and confidence in the framework, and recommendations on raising the age of entitlement for Raising the age of eligibility from 60 to 65 caused NZS have not been politically welcomed. The recommendations in this report limited resentment, and reducing the pension are relatively modest: to raise the age of entitlement only in line with increased level from 80% of earnings to 66% was also seen longevity. But this change will not start as fair; but the introduction of the tax surcharge until 2027, meaning that any fiscal savings will be very small, especially if offset by on non-pension income led to tax avoidance, income-related benefits for those unable to remain in employment. especially via trusts. NZS, plus private provision, has generally resulted in very low deprivation and income poverty rates for those 65 and over. However, NZS is only just of work and savings. The report could Affording retirement income above the 60% of median income poverty have indicated how past issues in regard Table 9 of the report (p.41), which shows threshold, so that the very low level of to fairness have had political impacts. the gross public pension expenditure additional income most pensioners have Raising the age of eligibility from 60 as a percentage of GDP for a selection puts them at risk of poverty, especially to 65 caused limited resentment, and of OECD countries, demonstrates the for non-home owners. As the non-home reducing the pension level from 80% of relatively low cost of NZS. It would have owner group is likely to rise significantly earnings to 66% was also seen as fair; but been useful to have had the data in net in the near future, the adequacy of NZS is the introduction of the tax surcharge on (after tax) figures rather than the gross going to come under increasing pressure, non-pension income led to tax avoidance, figure which is entered into the national with consequential impacts on fiscal especially via trusts. accounts. The difference is just under one expenditures, or private savings: all of percentage point. Other OECD countries these issues are considered in section 3 of Population ageing (except Australia) have much higher the report, ‘Future challenges’. The future cost of population ageing is a expenditure due to an older age structure, function of the dependency ratio of the mainly because of the earnings-related Future challenges working-age population to those over nature of most OECD pension schemes, Addressing population ageing is the 65. The report indicates the substantial where higher pension levels go to those major challenge ahead, but the decline potential impact of increasing labour force who had larger incomes while in work. in home ownership and the increasing participation rates among both those in The low cost of NZS is a further reason expectations for rising living standards the 15–64 age group and the 65-plus age for having a universal, flat-rate pension. for those aged over 65 should be added group. The experience of a substantial While the data indicates that there is no to the policy mix. Raising tax rates on rise in the labour participation rates of need for New Zealand to panic, and could the working-age population to pay for those aged 60–64 following the rise in NZS be used to justify the slow rate of raising the baby boomers’ pensions may result entitlement age in the 1990s could have the age of eligibility from 2027, the report in new political configurations due to been used as an example of behavioural states that ‘it makes sense to take steps perceived intergenerational inequity: responses to policy change. This example now’ (p.41). for example, how willing will a young would also have provided support for the

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 19 Focusing on the Future: a summary and critique of the 2013 retirement income report

Figures 5 and 6 (pp.42 and 43) 2. Changing the method of indexation. In them more vulnerable to income compare current expenditures on health, the 1990s, when adjustments to the poverty. NZS, education and non-NZS welfare pension were based on movements The proceeds from the New Zealand expenditures, with three alternative in the consumers price index Superannuation Fund can be used as scenarios: (CPI) rather than average income, a form of intergenerational transfer 1. cost-pressure increases based on past income poverty quickly emerged for of the cost of NZS. Current working growth rates; pensioners with limited additional baby boomers are paying less tax than 2. net debt stabilised at 20% of GDP; income. (The post-1999 Labour- required to sustain their NZS, and 3. the current population age structure led governments raised pensions making contributions to the Super Fund. maintained into the future: this back to 66% of average wages.) The The fund provides a useful mechanism scenario shows how much of the report recognises this possibility and to spread the tax burden fairly across cost increase is due to age structure recommends using the average of generations, thus improving the changes. wage growth and CPI movements. affordability of NZS. The fund improves The cost pressure increase is large for This approach should maintain the level of savings, and, if it continues health and NZS and downward for the current living standards and provide to be sensibly invested, can increase the other items of social expenditure. The for some of the benefits of economic rate of economic growth. But additions ageing population impact explains most growth. The report also recommends to the fund are only sensible if the return of the estimated four-percentage-point greater use of targeted second-tier on the fund is greater than the interest increase in health and NZS expenditures benefits, but this would reduce the cost of government debt. The report to 2050. desired level of fiscal savings. recommends that the fund’s returns be made tax exempt, which would treat them similarly to those of ACC and EQC, The New Zealand evidence indicates that only but be out of line with the additional tax burden that is placed on the returns from a third of contributions to KiwiSaver represent private savings. additional savings (p.66), as many private The report’s conclusions on the options are appropriate: ‘the issue that occupational pension schemes have been rolled arises is not so much one of affordability as of future generations’ ability and into KiwiSaver. willingness to pay the additional cost’ (p.47).

Options for reducing the cost of NZS 3. The impact of KiwiSaver. The report New Zealand’s saving performance The options need to be seen in relation correctly indicates that ‘KiwiSaver There is considerable concern and to other aspects of retirement income, is additive to NZS, not a substitute’ debate as to whether New Zealanders especially KiwiSaver. (p.46) and represents the second are saving sufficiently to supplement 1. Raising the age of eligibility. The tier of pension schemes. But the NZS and maintain their pre-retirement report argues that ‘[r]aising the age report requests further research on income. Macroeconomic data shows that will also save money’ (p.44, italics how KiwiSaver could impact on aggregate savings are potentially negative. added) – presumably this means the method of indexation. Using The macro data looks at economy-wide fiscal savings, as individuals just KiwiSaver to lower the rate of savings, including public, external and turning 65 will lose money. The adjustment of the pension level could individual debt as well as personal savings. cumulative impact is a significant be seen as a back-door method of The data does not allow an assessment of fiscal saving on pensions, especially means-testing for NZS. whether individual savings are adequate with increases in labour force 5. Varying the age of eligibility. People for a desired retirement income, nor participation, but the savings need could delay the time of receipt of the extent to which KiwiSaver accounts to be offset by greater expenditure NZS and receive a higher pension as are offset by reductions in other private on income-related benefits. The a result. There should be no future savings. Overseas evidence suggests that proposal to raise the eligibility age in fiscal impact if pension levels are the extent of transference between forms line with changes in longevity seems actuarially calculated. Compared to of savings is substantial. The New Zealand logical, but does not give certainty raising the age for all, it would assist evidence indicates that only a third of to individuals or fiscal forecasters, those retiring early or with a lower contributions to KiwiSaver represent and would have high administration life expectancy. It would increase the additional savings (p.66), as many private costs with constant changes in the risk for those making an incorrect occupational pension schemes have been eligibility age. estimate of their longevity, making rolled into KiwiSaver.

Page 20 – Policy Quarterly – Volume 10, Issue 3 – August 2014 The microeconomic data indicates KiwiSaver has become a political Housing a general adequacy of savings to football, with changes to the employee The report covers the impact of home maintain pre-retirement income. There and employer contribution rates and ownership and housing costs on the are substantial differences in the level tax liabilities. The report does not adequacy of retirement income. Those of household savings by gender, age, advocate compulsory membership, but who own their homes generally have ethnicity, income levels when in work, would like to see a more active approach a higher standard of living, are able to home ownership etc., with adverse events to enrolment, with greater financial maintain their independence longer, and such as poor health, redundancy, divorce education. The report supports the have a better standard of accommodation. or death of a spouse also exacerbating administrative, compliance, enforcement Those in rental accommodation tend to individual differences in savings levels. and monitoring aspects of KiwiSaver have a high rate of income poverty (Perry, Maintaining the level of NZS is a developed since 2007. It supports 2013). necessary safety net to offset these risks maintaining the use of a single account Home owners have an asset which and lifestyle events. for each member whenever members could be used to enhance current living Savings are not necessarily beneficial change employment. standards, through equity release schemes, for an economy. Savings reduce where the asset value is converted to consumption levels, and thus production Adequacy of income in retirement an income stream or lump sum, or and employment. Savings have to go into The amount of income from savings in by downsizing into a smaller property new productive investment to make a retirement is partly a function of the ability (Davey, 2005). The report indicates contribution to economic growth, but are often invested overseas, or into housing as a rental investment, which can raise [the 2013 retirement income report] lack of house prices and rents. Reduced levels of home ownership in future will affect the coverage and influence should be of grave concern adequacy of NZS for renters. The report to policy makers who have to consider long-term provides limited direct recommendations to address this issue. fiscal impacts from population ageing. Further, aggregate savings only increase while the fund is building up: when mature, the savings fund will remain constant, or, with an ageing population, to save and desired standards of living in the limitations of both approaches. fall. Some 72% of those aged 65 and retirement, complicated by unknown Equity release has issues with estimating over intend to withdraw their savings longevity, the after-tax interest rate on longevity and high interest rates. from KiwiSaver over the next five years, savings, and the degree to which assets Downsizing may be restricted by a lack generally in a lump sum (Dwyer, 2013). are run down in retirement. This latter of availability of smaller dwellings with The impact of this on aggregate savings feature is overlooked in the report. The ready access to transport, and the capital depends on whether these funds are used commission’s Sorted website concentrates released may be too small to generate a for current consumption (overseas trip, on the level of current savings for that satisfactory income stream. Movement payment of debt, etc.) or reinvested. adequate income, but not possible means into retirement villages may release some of asset rundown (decumulation) to financial capital, but incurs regular fees KiwiSaver maintain post-retirement income levels and complex legal issues. KiwiSaver, which started in 2007, is a (Rashbrooke, 2014). Scenarios can be The recommendation is for yet ‘voluntary’ occupational pension scheme done on an actuarial basis (requiring another review, to find ways of increasing designed to increase individual retirement costly financial advice) or by self-help. The the supply of age-friendly housing, income. Contribution rates are relatively Sorted website could indicate that, with a presumably covering issues of design, low at 3%, though 36% of members have portfolio of assets, one bundle could be transport and access to amenities. a 4% contribution rate. The report states set aside for the rainy day, greater-than- that only half of eligible New Zealand expected longevity or for inheritance. Continued employment residents are members, but this includes Then, with different net interest rates Adequacy of income can be maintained those aged over 65 or who are not in the and varying amounts of drawdown, it by continuing to work beyond the age of workforce. 67% of people aged 18–24 are could indicate how long the other assets eligibility for NZS. The universal nature members, indicating a degree of acceptance would last; if too short or long, then the of the pension, with no income test, among the younger generation, possibly decumulation rate can be adjusted. The along with the absence of a compulsory due to a belief that NZS will no longer report recommends only the development retirement age encourage labour force exist when they retire (Pinkerton, 2010), of an Ministry of Social Development participation. Over the 22-year period and the potential use of KiwiSaver funds discussion document on decumulation. from 1991 to 2013 the proportion of as a deposit for home purchase. people 65 years and over participating

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 21 Focusing on the Future: a summary and critique of the 2013 retirement income report in the labour force has increased from burdens for low-income earners, and lack rates when the children have left home. 5.8% to 22.5% (Statistics New Zealand, of incentives for financial advisers. Greater Of course, many do not fit this picture, 2014). This rise in the participation rate financial literacy is seen as the preferred but at least acknowledging the benefits reflects reduced employer discrimination mechanism, giving individuals the ability of flexibility in savings rates, with some against older workers, skill shortages and to make appropriate savings decisions, instructive guidance, may help even out a willingness of employees to continue rather than compulsion. income and expenditures and provide for working (Davey, 2014). Not all are able or The Sorted campaign certainly tries greater income adequacy over the whole wish to. Attitudinal change needs to start to provide financial advice, but there is life cycle, not just when over 65. when a worker is younger. Other factors limited discussion here about how many are a possibility of retraining, part-time people actually use the service and act on Future directions work, adjustment for health status or job its information. The report would like to This section covers the recommendations change (e.g. going from being a builder to see financial advice provided through the made in the body of the report, on keeping a building inspector). workplace as well as its own programmes NZS fair and affordable; KiwiSaver; the The report is neutral on the ‘lump to increase financial literacy. However, New Zealand Superannuation Fund; of labour’ theory, which posits that most people receive information from financial literacy; taxation; age-friendly employment of older workers reduces banks, which tend to push their own housing; age-friendly workplaces; employment for younger people. products; family or friends, who are and international pensions. When the The majority of research rejects the not always well informed; or financial recommendations are put in one place, the hypothesis. advisers who are not always well known document seems very conservative, which The report’s recommendation is or trusted. The recommendation to give is probably because past reports have been weak. It calls for the Ministry of Business, the commission ‘an explicit mandate to largely ignored by governments. Being Innovation and Employment to ‘work lead the provision of financial education’ published just prior to Christmas 2013, with employers, industry associations and (p.87) would probably have limited the report received limited media coverage unions to implement ways to encourage impact on the status quo. and probably had limited influence within the recruitment, retention, retraining and The report fails to consider issues government circles. This lack of coverage mobility between jobs of older workers’ round the appropriate timing of savings. and influence should be of grave concern (p.83). It assumes that saving from a young age to policy makers who have to consider is the best option, due to the impact of long-term fiscal impacts from population Financial literacy accumulated interest. Taking account ageing. Individuals should be concerned, The report agrees with the trend towards of the life cycle could provide greater as the lack of detailed policy development greater individual responsibility for flexibility for savings levels, with high gives politicians too many opportunities retirement income, provided that savings rates before the arrival of children to alter both NZS and KiwiSaver. The responsibility is underpinned by NZS. (and thus a base from which interest can hard decisions are left for other reviews, Making KiwiSaver compulsory reduces accumulate), low savings when equivalent but the commission has been around the risk for workers, but compulsion is not income falls because of the extra costs long enough to have done the required recommended due to compliance costs, associated with children and often a analysis themselves. savings substitutions, greater financial shift to one income, then higher savings

References Commission for Financial Literacy and Retirement Income (2013) Guardians of the New Zealand Super Fund (2013) ‘The role and Focusing on the Future: report to Government, Wellington: performance of the New Zealand Superannuation Fund’, background Commission for Financial Literacy and Retirement Income papers to the 2013 review, Commission for Financial Literacy and Davey, J. (2005) The Prospects and Potential of Home Equity Release in Retirement Income New Zealand: update to 2005, Wellington: Office of the Retirement Perry, B. (2013) Household Income in New Zealand: trends in Commissioner, available at www.retirement.org.nz Indicators of Inequality and hardship 1982–2012, monitoring report, Davey, J. (2010) ‘What Are We Saving For? Using assets in retirement’, Wellington: Ministry of Social Development in J. Davey, G. Rashbrooke and R. Stephens (eds), Retirement Pinkerton, N. (2010) ‘Getting buy-in from the young’, in J. Davey, Income and Intergenerational Equity, Wellington: Institute of Policy G. Rashbrooke and R. Stephens (eds), Retirement Income and Studies, Victoria University of Wellington Intergenerational Equity, Wellington: Institute of Policy Studies, Davey, J. (2014) ‘Age Discrimination in the workplace’, Policy Quarterly, Victoria University of Wellington 10 (3) Rashbrooke, G. (2014) ‘Decumulation Methods 101’, Policy Quarterly, Dwyer, M. (2013) ‘The Place of KiwiSaver in New Zealand’s retirement 10 (3) income framework’, background papers to the 2013 review, Statistics New Zealand (2014) 2013 Census of Population and Dwellings Commission for Financial Literacy and Retirement Income

Page 22 – Policy Quarterly – Volume 10, Issue 3 – August 2014 Geoff Rashbrooke

Decumulation 101 the basics of drawing down capital in Overall, the object of the article is to introduce readers to the policy retirement questions at a fairly high level, and there will be no in-depth research quoted; Introduction academic references are unashamedly in Decumulation in the retirement income context is the using short supply. Readers are left to identify research possibilities for themselves. up of retirement savings by way of drawing out regular Relevance income – for example, a fixed amount each month. It’s the For most people, life experience up to converse of accumulating retirement savings while in paid retirement does not teach how to manage retirement savings assets for financial work by regularly putting money aside. And return on support thereafter. Investment of savings is mostly left to experts. At best, many aim investment plays its part in both: in the accumulation phase to live on the income generated by those it enhances the amount saved; in the decumulation phase it assets after retirement, and leave the assets for their heirs. At worst they spend the lot, enhances the regular amount that can be paid out. which may have its attractions but doesn’t usually result in anything sustaining for The first question is whether decumulation to individuals will naturally vary the rest of life. is something that actually needs any according to their preferences in respect The lack of acquired competence in policy attention. Since the answer to that of those points. The article concludes by managing financial assets for income question here is a qualified yes, the next positing some public good components could be seen as already sufficient reason part of this article outlines a number of in respect of each decumulation method, for paying attention to decumulation decumulation methods, considering such and setting out some possible government policy. But provision of regular income is matters as cost, risk and flexibility. The interventions in response. only one use of retirement savings, and a desirability of any form of decumulation number of conflicting objectives need to be reconciled. Some questions individuals

Geoff Rashbrooke is a Senior Associate of the Institute for Governance and Policy Studies. He is a need to ask themselves as they withdraw consultant on insurance and pension schemes and was formerly Government Actuary. from paid work are:

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 23 Decumulation 101: the basics of drawing down capital in retirement

• What debts would it be sensible assessment may lead to the conclusion rent in this context) and no tax on any to pay off, so as to save making that decumulation is not relevant to them: drawdown of capital. repayments out of my retirement access to some financial assets can often income? make a significant difference to welfare Financial adviser as manager • What amount of assets do I want after retirement, providing resilience This is employing a person on an ongoing to hold as ‘rainy day’ money against to financial shocks. For those more basis to manage the drawdown of shocks (such as needing urgent financially advantaged the assessment retirement assets. This seems ideal. There medical treatment not available is not straightforward. One problem is should after all be a number of people quickly in the public health system) that the income one might generate from who have an excellent knowledge of the or some planned major expenditure, decumulating some savings can be hard financial products on the market, and who such as travel or replacing a car? to quantify. (The Sorted website of the also understand how to communicate and • Is there some bequest I want to Commission for Financial Literacy and engage with their clients in order to explain make? Retirement Income could help here, but the risks and rewards of different scenarios. • Apart from my ‘retirement savings’ would need to be able to reference and There are, however, two large problems assets, what other assets do I have: quantify decumulation products.) with entrusting retirement wealth to for example, a house? Nonetheless, decumulation products an adviser. One is cost. On a person- • Is all the income generated from my have the potential to be very useful, to-person basis, if you have moderate assets available to be spent, or do I particularly for those with minimal wealth then it is very expensive relative to want to put some aside to protect the bequest intentions. And, without wanting assets to engage a financial adviser other real value of my intended bequests? to sound excessively paternalistic, it may than short-term, and not always just then. Commission-based remuneration disguises this cost, but does not align the interests of the adviser and the client. Although regulation of advisers has The other problem is competence. It improved over the last decade, there is has been said of financial advisers that those who can, work on their own account, still no real basis on which to assess who and those who can’t, advise. Whether one agrees with that or not, what is inescapable will do a good job and who will not. is that a poor adviser can cost clients dearly through their naivety or inability, let alone any fraudulent behaviour. Although regulation of advisers has These questions lead to identification be no bad thing to have some assets improved over the last decade, there is still of the assets one wants to hold on to, assigned to providing income and not at no real basis on which to assess who will and for how long. In turn this leads to risk to financial predators. Among other do a good job and who will not. Hence, determination of how much, if any, will things, cognitive failure is more of a risk although there are doubtless some very be available to be run down through with greater age. good practitioners and a number who are decumulation to provide additional reasonably competent, getting a financial income on top of: Decumulation methods manager who is not up to scratch puts at • investment income from the assets The decumulation methods discussed risk the whole of one’s savings. planned to be retained (rather than here are: There is little scope to reduce the run down), including rents; 1. Financial adviser as manager cost of direct, ongoing financial advice. • New Zealand Superannuation when 2. Lifetime annuity One could observe that on average eligible; 3. Pooled annuity funds a financial adviser is less likely to do • any private pension; 4. Drawdown ‘pension’ damage to a client’s savings than the • earnings from continued paid 5. Term annuity client themselves, and that this has workforce participation, including 6. Drawdown ‘pension’ or term annuity value. How much, however, is disputable. self-employment. plus deferred annuity And adviser competence issues remain: There may well be trade-offs needed 7. Home equity release. poor performance has catastrophic and between the level of total regular income For each I describe salient features, unrecoverable effects. one would like to have and how much pricing issues, relative advantages and one wants to retain for bequests and/or disadvantages, and, where relevant, tax The lifetime annuity rainy day money (and hence not available issues for neutrality. Tax neutral treatment This is the most traditional form of for decumulation). is taken as tax at the applicable individual decumulation. An insurer, by pooling For those with little retirement rate on income (interest, dividends and mortality risk over a sufficiently large savings and no freehold house, such number of annuitants, can offer to provide

Page 24 – Policy Quarterly – Volume 10, Issue 3 – August 2014 a fixed monthly amount for life in return Pooled annuity funds expense risk), the drawdown pension for a lump sum. The insurer also effectively These are an attempt to reduce the cost works on an individual approach. There provides a guaranteed investment return. (i.e. improve the annuity payout) of are variations, but the basic approach The working of an annuity is not, however, the lifetime annuity. The administrator is for a regular payout to be calculated at all transparent. Determining how operates a pooled fund for mortality and based on the amount deposited, expected much monthly payment can be made for investment risk, but does not provide investment return and expenses, and the a given lump sum depends on projecting any guarantees. The initial annuity is pensioner’s preferred payment period. annuitant mortality (rather lighter than estimated based on applicable mortality Operationally, a pension account is population mortality), investment return and anticipated net investment return established, investment return credited, and expenses, and incorporating a profit (and expenses), but annuity amounts and pension payments and expenses margin for the cost of the capital held for may be reset each year based on actual debited. Tax is – or should be – paid solvency purposes. So annuities remove experience. The administrator profit by the pensioner on the net investment mortality, investment and expense risk is usually derived from the investment income credited. When no money is left, in respect to the payments the annuitant activity. payments cease. If the pensioner dies is due to receive, but in doing this are Normally, lifetime annuity pricing before running out of funds the balance more expensive to provide than a simple is based on the best expected longevity goes to the heirs. analysis would suggest. (unless annuitisation is compulsory). Were the period set to life expectancy On the demand side, potential Pooled annuity funds are voluntary, but – the average period a person is expected annuity purchasers have difficulty with could be segregated and, by making use to live – then, assuming investment the prospect that if they die early, no of insurance risk assessment processes, returns and expenses match the estimates, refund of the unexpended part of the purchase price is available. One can try to explain that this is the result of risk- Were the period set to life expectancy – the pooling and someone has to pay for those who live longer than average, but the average period a person is expected to live – downside risk does predominate. And, of course, there is no flexibility, no facility to then, assuming investment returns and change the arrangement to cope with an expenses match the estimates, half the unexpected call on funds. In terms of taxation, the aim should pensioners will run out of funds before they be neutrality for the individual. It is possible, although complex, for tax to be die. attributed to individuals by reference to the balance remaining of their purchase price, plus investment return credited to pool those with poorer longevity half the pensioners will run out of funds date, net of all expenses, plus the share of prospects. However, attracting enough before they die. For this reason a longer fall-in from deceased annuitants. Since it people to make this viable on a voluntary payment period may be favoured: for would be impossible to set prices based basis appears difficult. Indeed, while example, to the point where 70–75% of on projecting future individual tax rates, theoretically attractive, pooled annuity people will have died. Conversely, people neutrality requires the insurer to pay no funds appear to have obtained even less who consider they are in poor health, or tax on its annuity business (other than traction than life annuities. Likely reasons who have other resources for later in life, profit, as it emerges) and the annuitants to include the downside risk of loss of may prefer a period less than the average be taxed directly on attributed investment some capital outweighing the continued lifespan. income each year. payment, and absence of a tradition Because funds are held in individual A useful approximation in place of of such funds. Obtaining neutral tax accounts the facility of lump sum annual attribution is to identify one half treatment again has the same issues as withdrawals can be provided, with of an annuity payment as income: this with the lifetime annuity. The only real a reset of the monthly pension. The may be acceptable on the basis that, very advantage of pooled annuity funds over administrator, however, will need to broadly, half of the total payout over lifetime annuities is the absence of a charge those who avail themselves of this an average lifetime will be investment requirement for regulatory capital, and appropriately, since not only are there income and half will be return of capital. therefore potentially higher annuities for administrative costs, but also implications (The precise split depends on the level the same purchase price. for investment policy if higher liquidity of investment income earned.) Note that may be needed. this approximation takes relatively more Drawdown ‘pension’ Costs of the pension will include from those who live longer on average While the lifetime annuity pools investment charges and administration, compared to those who die early. mortality and investment risk (and as well as a profit charge (although little

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 25 Decumulation 101: the basics of drawing down capital in retirement regulatory capital is needed), basically Drawdown ‘pension’ or term annuity plus annuities presents the same issues as for for providing an investment service. deferred annuity immediate lifetime annuities Drawdown pension arrangements can From the discussion of decumulation offer a variety of investment allocation methods so far, it will be noted that Home equity conversion strategies, particularly for longer planned drawdown pensions have the greatest Home equity conversion is not strictly drawdown periods; the deduction from ‘market’ appeal due to flexibility, but speaking a decumulation option itself, gross income for investment charges (and do carry the risk of reaching a certain but the funds made available from profit) should be transparent, but may point and running out of income. Term releasing equity in the home can then not always be so. annuities have the same drawback. This be converted into an income stream, in While the greater flexibility and capital suggests combining a drawdown pension one of the ways set out above. The most protection are attractive, drawdown arrangement or term annuity with a common form of home equity release, the accounts can be depleted for the longer- deferred annuity – that is, a lifetime reverse mortgage, advances money on the lived, potentially giving rise to a non- annuity which doesn’t commence until security of the home. Compound interest anticipated fall in living standards. Poor age 80, for example, or even age 85 – in is payable on the advance, but the owner investment returns compared to those order that there is a guarantee of income retains full entitlement to remain in the anticipated in setting the drawdown in the later years if one survives past the home. The advance and accumulated interest are recuperated when the owner dies or moves out, whichever occurs first. ... many people are not well equipped Reverse mortgage contracts usually to manage retirement assets for have a no negative equity guarantee: that is, the total recoverable cannot exceed the decumulation purposes themselves; nor current value of the house after expenses of sale. For this reason the maximum is it reasonable to expect them to upskill proportion of value that can be released (assuming ability to do so). takes into account mortality (including mortality improvement), likely interest charge, and likely increase in house prices for the kind of property in question. It is understood that paying an advance amount may curtail the actual period as regular income has been considered of receipt (although the converse, better drawdown period or comes to the end of by local home equity providers. There is returns, will extend it). the term annuity period. no obvious reason why such providers A deferred annuity requires rather less could not offer a drawdown facility, and/ Term annuity regulatory capital in relation to mortality or make deferred annuities available A term annuity is a series of regular risk than an immediate annuity, because through a registered insurer. payments for a fixed term. Unlike a the guarantee period is quite a lot lifetime annuity, payment continues if shorter. There does, of course, need to be Public good issues the annuitant dies before the end of the regulation to ensure adequate reserves are The argument here is that welfare in later fixed term. Pricing, therefore, does not held and that profits are not anticipated life would be improved were greater use need to include mortality projections. before they are earned. Nonetheless, made of decumulation products. As The advantage of a term annuity over deferred annuities are less capital- discussed earlier, many people are not well a drawdown pension is that the payout intensive than full lifetime annuities, and equipped to manage retirement assets for amounts are known: there is effectively an should be more easily presented as direct decumulation purposes themselves; nor investment guarantee. Conversely, there is insurance against living too long. is it reasonable to expect them to upskill no flexibility in terms of access to lump Purchase of a deferred annuity need (assuming ability to do so). And having sums. And, like drawdown, the payout not be associated with obtaining a assets assigned to decumulation will also may well stop before death, the likelihood drawdown pension or term annuity, but offer protection against fraud and loss of of that depending on the term chosen. put together they offer the opportunity cognitive ability. Regulation requires ensuring adequate for retirement planning by harmonising The decumulation products described reserving, plus regulatory capital for the the regular income from drawdown or above are, however, either not widely investment guarantee. A term annuity fixed-term annuity and the deferred available or in apparently low demand. is likely, therefore, to be less than a annuity (although there could be a hiatus In this situation, a three-pronged comparable drawdown pension. Tax on if the drawdown funds run out before policy response in respect of education, investment return has the same issues as the deferred annuity kicks in). Note that standardisation and regulation (including for a lifetime annuity. the neutral tax treatment of deferred tax) would do the following:

Page 26 – Policy Quarterly – Volume 10, Issue 3 – August 2014 Education would explain the only the very wealthy would find such an Ultimately, however, it is difficult to advantages of decumulation, help approach cost-effective, no intervention is see how insurers can obtain a required people identify what assets (if any) needed. However, the very wealthy are not return on capital without compulsory could be used for decumulation, necessarily all financially astute, and in any annuitisation, as there was in the and identify the pros and cons case some with lesser wealth might want UK until very recently. For example, of different options according to to consider the possibility. For monitoring government could require annuitisation personal preferences in respect of and regulation purposes, then, a policy of the subsidised element of KiwiSaver risk, flexibility and cost. option would be to maintain a register entitlements. If that is a step too far, and of qualified decumulation managers. there are good arguments either way, Standardisation would be desirable Applicants would need to demonstrate then arguably there becomes a role for in order that people not become fitness for the role, and to file reports government to establish a state-owned bewildered by choice, and would help on their activities and performance on annuity corporation to provide lifetime keep education initiatives focused. behalf of their decumulation clients, with annuities, on market-failure grounds. A comprehensive but limited option the registrar given a proactive role in Were this to occur, however, there will set can be a useful nudge as to what monitoring. The aim would be to identify still be need for best-practice regulation people should be looking at. It also enhances competition, as comparison of different providers is considerably simplified. Once the basics have The existence of properly costed and been in place for a while, more sophistication can be introduced managed deferred annuities would allow later. retirees to decumulate initially using Regulation is required to give confidence that, where a drawdown pensions and/or term annuities, decumulation product provides guarantees, the purchaser can be protecting themselves against early death confident that, in all reasonably ... foreseeable circumstances, those promises will be kept. It provides not only for reporting but also for monitoring and enforcement, where poor performance before it did too much (including for solvency capital) and best it is not reasonable to expect most damage; however, a performance guarantee design practice: ideally automatic cost of clients to have the adequate skill or fund, with levies tied to risk profiles, would living indexation, or at least some proxy interest to do this themselves, and also provide assurance to potential clients. such as annual 2% increases (i.e. at the there is no gain for third parties Significant penalties for carrying out this broad inflation target rate). to step in. Tax treatment would be business unregistered would be necessary to Education initiatives to explain neutral across options to avoid tax deter the unethical, and protect the brand. annuities, particularly the guarantees, arbitrage affecting choice between With this structure in place, education would only be sensible if these other products. Some concessional measures would be straightforward: steps are taken – i.e. tax neutrality, sound treatment could, however, be describe the register, set out the regulation, and either some compulsion considered on a cost-benefit requirements placed on those registered, or the imprimatur of a government assessment where any particular and give an indication as to likely annual entity. decumulation product benefits the costs. whole community. Drawdown ‘pension’ Lifetime annuity This option is the most transparent and So what might this policy framework While the benefits of these are education can focus on how it works mean in respect of each decumulation appreciated by risk professionals, there without too much difficulty. The key method listed above? is a corresponding lack of appreciation policy action is standardisation. What by laypeople. Education could assist, but would be truly useful would be to require Financial adviser as manager there will remain distrust of insurers due each KiwiSaver default provider to offer a What is being considered here is to the opaque nature of the product. This drawdown pension arrangement with the having someone manage the whole can be addressed in part by improved following characteristics: decumulation process through ongoing regulation, including a review of currently • a standard pension based on asset management, not just giving advice applicable tax rules (also opaque); it Statistics New Zealand population on decumulation products such as lifetime would be helpful if tax treatment was best-estimate mortality projections annuities, etc. One might consider that, as demonstrably neutral. to last five years past life expectancy,

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 27 Decumulation 101: the basics of drawing down capital in retirement

and investment return based on the however, is that by providing an income effective education campaigns to assist experience of the provider’s default source, it could constrain access to welfare more comprehensive retirement income portfolio, net of expenses; benefits such as the residential care planning. • a ‘high’ pension to last until five years subsidy. Certainly, where means testing before life expectancy; focuses on income and excludes capital, Home equity release • calculation of pension to allow treating a capital element as income would Education here would have two aspects: for automatic increases of 2% per be disadvantageous. letting people know that they have an annum; These considerations suggest that a income option through using one of • access to capital on full cost recovery, concessional tax treatment for deferred the main decumulation approaches; including a liquidity charge; and annuities might have direct welfare and making sure that the costs of home • opportunity to reset – subject to a benefit savings, as well as being welfare- equity release are understood. The minimum monthly pension amount, enhancing in the wider sense. It would dominance of one provider in the past has since costs are similar per payment. clearly be essential to ring-fence deferred handicapped proper competition, with annuities from other forms of annuity, the profit margins – to the extent that Regulation would fall under current and to have appropriate prudential these can be estimated – looking very high KiwiSaver rules and scrutiny. While other regulation. compared to those in more competitive forms of drawdown need not necessarily Whether or not the market-failure jurisdictions, such as the UK. Again, it is be barred, some form of branding should argument to have government offer moot whether the government needs to be used to establish the primacy of the lifetime annuities is accepted, the argu- introduce competition by establishing its standard versions, and other forms would ment becomes stronger for deferred own provider, as it did with Kiwibank; need to be brought under KiwiSaver annuities, picking up the role of a problem, however, could be finding legislation. government as insurer of last resort. enough credit. Were the government to Whether this role could extend to get involved, it could reasonably require Term annuity inflation indexing is another point for that proceeds be taken as drawdown or This is in essence a bank product, since investigation. Certainly the absence of fixed-term plus deferred annuity – i.e. management principally concerns credit any facility to obtain a good annuity focus on income provision. risk. One might consider requiring banks product was regarded as an argument to offer a range of terms – 5, 10, 15 years for being able to choose to defer New Recommendations – in return for government education Zealand Superannuation payments. Provision of lifetime annuities has initiatives so that retirees include these The existence of properly costed collapsed and no immediate replacement as options to consider. Certainly it would and managed deferred annuities would has occurred. Some government help retirees (and their advisers) to have allow retirees to decumulate initially intervention could assist the development an indication as to what they could obtain using drawdown pensions and/or term of the most promising option, the in this fashion. annuities, protecting themselves against drawdown pension. Standardisation early death, and then have continued is strongly recommended to ensure Pooled annuity funds income if they survive past the point when good understanding through education While discussion of decumulation would the other two run out. The balance to put initiatives and meaningful competition, have been incomplete without mentioning into a deferred annuity compared to that leaving room to relax strictures when the these, there does not seem any compelling for drawdown or fixed term could be set method has better public understanding. reason to devote any further consideration according to preferences for continuing Deferred annuity provision is the to them here. income: some might wish to target a natural complement to drawdown. Some level income; others a lower income in people may not want that insurance, but Drawdown ‘pension’ or term annuity plus the deferral period, perhaps because they for those who do there are currently no deferred annuity expect to be less active. The Sorted website market products. Again, government The deferred annuity can be seen as would be very suitable in helping people intervention, including public education, the missing piece of the puzzle, since it investigate this for themselves, and the appears necessary; in time this should provides insurance against living longer Commission for Financial Literacy and lead to opportunity for private providers. than expected. One obvious drawback, Retirement Income could no doubt run

Page 28 – Policy Quarterly – Volume 10, Issue 3 – August 2014 Susan St John

What Has New Zealand’s Retirement Policy Framework to Offer the International

New Zealand Superannuation (NZS), the Debate? foundation of New Zealand’s retirement income system, is a universal, pay-as-you- go (PAYG), taxable age pension, partially pre-funded by accumulated assets in the Introduction1 New Zealand Superannuation Fund. New Zealanders don’t realise that they are regularly regarded Alongside NZS sits KiwiSaver, the world’s first national auto-enrolment saving in other countries as world leaders, not just in sport. scheme. New Zealand’s success with the Inaugural New Zealander of the year in 2010, Ray Avery, ‘soft compulsion’ of automatic enrolment has been and is continuing to be an points to the ‘never say it can’t be done’ attitude that has influence in the design of opt-out schemes in the UK, Ireland and the United States. produced many astonishing results in science. In social policy Seven years on, this retirement saving too we have often been ahead of world thinking. One very scheme both is well accepted by the public and has certain clever design features. under-trumpeted innovation is our retirement incomes If KiwiSaver is made compulsory, as policy, which, along with ACC, is unique on the world stage. some powerful lobbies propose, there are large complexities to resolve, including

the future role of the universal state Susan St John is co-director of the Retirement Policy and Research Centre at Auckland University, pension, NZS. It is timely to reflect on the with research interests in public sector and retirement policy issues. really good things about our retirement

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 29 What Has New Zealand’s Retirement Policy Framework to Offer the International Debate?

Table 1: New Zealand Superannuation rates at 1 April 2014 low replacement rates if just the state Annual rate Annual Net Annual Net 33% pension is considered (OECD, 2011, Category % net average wage* NZ$ (gross) Primary Tax Tax p.125). Individuals have been expected Single, living alone 43% $21,932 $19,080 $14,494 to save privately, including in employer- Single, sharing 40% $20,154 $17,613 $13,503 sponsored superannuation schemes, to achieve higher effective replacement rates Married person or partner in civil in retirement. union or de facto relationship (each) 33% $16,633 $14,678 $11,144 Source: Work and Income website: http://www.workandincome.govt.nz/ KiwiSaver * Supplementary income- and asset-tested benefits may also be paid. KiwiSaver is the world’s first national auto- enrolment saving scheme. It was initially Figure 1: Married unemployment benefit vs NZS payments conceived as a purely voluntary saving scheme, with a modest government- 300 provided kick-start and a fees subsidy as ‘sweeteners’. KiwiSaver is fully portable. 250 Thus, when members change jobs or they leave employment their scheme goes with eek ($) 200 them, providing a valuable simplification er W

150 over traditional employer-based schemes. With some exceptions, all new employees

100 are automatically enrolled in KiwiSaver if they are not already members. Currently,

ceived P yment Re Pa 50 employees and employers each contribute 3% of wages. Enrolled employees can 0 chose to opt out, or go on a contributions holiday after a year of contributions. (For 1998 2001 2004 2007 2010 2013 more detail see St John, Littlewood and Married Net NZS Married Net Unemployment benefit Dale, 2014, as in References an U Auckland website) incomes framework before making ill- floor of 66% is reached, then net pensions In 2014 the tax-funded subsidies considered changes. Looking to the rise with the net average wage. comprise just the kick-start at $1,000 future, this article suggests that New Home ownership rates are high for new members and a maximum $520 Zealand is in a unique position to build amongst the ‘baby boom’ generation, government contribution for the first on this framework and offer leadership and thus housing costs are relatively low. $1,040 of annual member contributions. in helping solve some of the intractable When compared with basic age pensions By international standards these subsidies issues around decumulation that are internationally, and with other welfare are extremely modest, and their unindexed plaguing other countries. benefits domestically, NZS is generous. nature implies that they will fall in value As a consequence, New Zealand has low quite quickly over time. New Zealand Superannuation rates of pensioner hardship, despite high KiwiSaver is not designed solely as an New Zealand introduced the old- rates of hardship among those on welfare employment-based scheme and is widely age pension in 1898 to provide some benefits (Perry, 2013). In the future, inclusive in its conception. This interesting protection for the deserving poor however, falling home ownership rates feature has helped membership reach aged over 65. Over 100 years later, the may affect the degree to which NZS is over 2.1 million,3 in a total population of retirement income framework has, at its adequate to remove hardship for those 4.3 million. foundation, a flat-rate, universal, taxable who rent. benefit, paid out of current taxation. The level of welfare benefits, indexed Purpose of the scheme Eligibility is from the age of 65 years, if only to prices since 1991 when the level The purpose of KiwiSaver has been, at modest residency requirements are met.2 of welfare benefits was cut, has fallen well times, confused. Is KiwiSaver’s purpose to Under a current political agreement, behind NZS over time. Figure 1 illustrates benefit the individual in retirement? Is it the combined net NZS rate for a couple how indexation of NZS to wages has to reduce the pressures on the economy has to be at least 66% of the net average continued to produce a growing gap of an ageing population? Is KiwiSaver wage (33% per married person). Higher between NZS and welfare benefits. supposed to solve the national saving rates apply for single people either living At retirement, while low-income problem? Or is it to expand the managed- alone or sharing accommodation (see earners do fairly well in an international fund industry? As long as the purposes are Table 1). NZS is indexed annually via the comparison of public pensions, those on unclear, the scheme is vulnerable to the Consumers Price Index until the wage average earnings or above have relatively industry determining the design of the

Page 30 – Policy Quarterly – Volume 10, Issue 3 – August 2014 scheme to meet its own objectives. The Inland Revenue Department Benefit (DB) employer-based pension When KiwiSaver was first announced, (2011) concluded: schemes to Defined Contribution (DC) the pivotal problem was seen to be one or lump sum schemes and a decline of low national saving. New Zealand is It estimated, on the conditions and in coverage. Importantly, even public heavily reliant on foreign saving, with settings of the scheme at that time, sector DB schemes were closed to new persistently large current account deficits that over the ten years to 2021 the members. The lack of impediments from and accumulated overseas debt. However, net contribution of KiwiSaver to a strong, tax-incentivised, employer- it was not clear that KiwiSaver was national savings would be marginal based superannuation culture allowed capable of lifting national saving.4 By the at best in the longer term, and may a clean roll-out of KiwiSaver as the new time the KiwiSaver Bill was introduced in fact reduce national savings. auto-enrolment national saving scheme there was little mention of the current in 2007. account deficit problem. The purpose of The goals of improving retirement With well-designed but modest the KiwiSaver Act 2006 is described thus: incomes and expanding national saving sweeteners, KiwiSaver has become the are inherently contradictory. Unless there occupational saving vehicle of choice to encourage a long-term savings is attention to the decumulation issues for most New Zealanders, including habit and asset accumulation by discussed below, KiwiSaver may simply for many within the public sector. Even individuals who are not in a position to enjoy standards of living in retirement similar to those in pre- With well-designed but modest retirement. The Act aims to increase individuals’ well-being and financial sweeteners, KiwiSaver has become the independence, particularly in retirement, and to provide retirement occupational saving vehicle of choice for benefits. To that end, this Act enables the establishment of schemes most New Zealanders, including for many (KiwiSaver schemes) to facilitate within the public sector. individuals’ savings, principally through the workplace. (KiwiSaver Act 2006) facilitate extra consumption by the better- when subsidies were greatly extended and A reference to the hope that national off cohorts of a larger retired population, enhanced on the eve of the introduction saving will improve was buried on p.36 imposing more pressure on the working- of KiwiSaver in 2007, there was never any of the bill, and was not included in the age population. intention of a return to the regressive tax act: concessions of the past. In the last few Tax reforms and success of auto-enrolment years these subsidies have been cut back, If the behavioural changes flow New Zealand is fortunate to have reformed as detailed in St John, Littlewood and through into increased domestic its tax treatment of saving for retirement Dale (2014). Interestingly, it appears that saving, then economic growth many years before KiwiSaver was once sweeteners have helped establish may increase as more funds may introduced. Based on the principle of tax KiwiSaver they can be reduced with little be available to fund domestic neutrality, the New Zealand tax reforms of impact, at least on the formal membership investment and reduce New Zealand’s 1988–1990 abolished all tax concessions numbers. reliance on borrowing offshore. for private retirement saving (St John, In contrast to the ease of introduction 2005, 2007). Contributions, whether by in New Zealand, the UK and Ireland face Law, Meehan and Scobie (2011) employer or employee, are out of after-tax two impediments in introducing their estimated that only about one third of income (T); fund earnings were taxed at a auto-enrolment schemes. First, they have the members’ contributions to KiwiSaver rate that proxies the individual’s marginal retained their over-generous, unreformed are ‘new’ savings. Even if there is an rate (T); but withdrawals are a return of DB schemes for public sector employees. impact on household saving, there is tax-paid capital and hence tax-exempt Second, they have a proliferation of no guarantee that national saving (the (E). Under TTE, saving for retirement the employer-based DC schemes. These sum of private and public saving) will same as saving in a bank account contrasts diverse and poorly-regulated schemes are improve. Importantly, while some of the with the heavily-subsidised EET treatment the beneficiaries of new auto-enrolment rhetoric suggests that more KiwiSaver conventional for retirement saving in proposals. The OECD notes: ‘much can be saving equals more investment and other developed countries, including done to improve the design of DC pension growth, in practice more saving from any Australia. plans and to strengthen retirement source does not ‘cause’ more or better The removal of all tax concessions income adequacy in these plans’ (OECD, investment. accelerated both the shift from Defined 2012). In their Ready for Ageing? report

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 31 What Has New Zealand’s Retirement Policy Framework to Offer the International Debate?

(2013) the House of Lords observed: ‘the Monitoring and regulation DC retirement schemes. However, the current DC pensions system is not fit As a generic product, KiwiSaver has Conservative–Liberal Democrat coalition for purpose for anyone who is not rich, facilitated the umbrella regulation government announced in 2010 that it or who moves in and out of work’, and and oversight provided by the newly- intended to end the requirement for DC the need to ‘tackle the lack of certainty established and fit-for-purpose Financial pension scheme members to purchase in DC pensions and address their serious Markets Authority. While individual annuities by the age of 75 (Blake, Cannon defects’. Compounding these issues, the providers can offer separate products, and Tonks, 2010). Noting that ‘the very generous tax incentives for both they do not have to do the marketing and annuities market is currently not working DB and DC schemes are widely viewed branding of KiwiSaver itself. in the best interests of all consumers. It as regressive, expensive and unnecessary. is neither competitive nor innovative and They are, however, difficult to remove, The flaws in KiwiSaver some consumers are getting a poor deal’, making a more rational framework like Lack of a decumulation policy the government has recently announced that in New Zealand near impossible to Despite clever features, there are adopt. nevertheless substantial flaws in the New a radical set of reforms which will Zealand approach if it is assumed that allow people more choice over how Administration income supplementation is the point of they access their defined contribution A clever feature of KiwiSaver is the KiwiSaver. Currently, there are no rules pension savings. From April 2015 the administration by a central collection as to how lump sum KiwiSaver funds government proposes to change the agency, the Inland Revenue Department, accessed at age 65 must be run down over tax rules to allow people to access with a unique tax identifier for individuals, the retirement period. The danger is that these savings as they wish at the who have one provider, that they chose, and funds will be dissipated far too early in point of retirement, subject to their marginal rate of income tax (rather than the current 55% charge for full New Zealand has a unique opportunity, with a withdrawal). (HM Treasury, 2014) largely tax-neutral TTE regime for accumulation, While it is clear that the market for to design an explicit subsidy to recognise the annuities suffers many aspects of market failure, this decision is an extreme gains to society from annuitisation, with few of the response, akin to throwing the baby out disadvantages of traditional tax incentives. with the bathwater, and is causing great uncertainty within the industry. There may be a stronger case for better annuities one account. This has avoided the problems retirement, with many people finding they rather than no annuities at all if the risks found in Australia, where many individuals live much longer than they anticipated. retirees face are to be addressed. have small sums in multiple accounts.5 In While New Zealand was an early adopter the UK, the National Employment Savings of the worldwide trend to shift risks New Zealand’s unique opportunity Trust (NEST) auto-enrolment plan has from employers to individuals in private With the provision of initially generous, required a separate infrastructure for superannuation schemes, lump sum or tax-funded subsidies, the government administration. Auto-enrolment can be DC schemes, including KiwiSaver, do not might have been justified in imposing into the employer’s existing DC schemes, currently assist with the management of restrictions on spending the maturing so that the NEST scheme is not a generic risks in retirement, as noted in the three- KiwiSaver lump sums. That option was national saving plan. yearly review by the Commission for ignored, indeed not even discussed, and Similarly, in the US auto-enrolment Financial Literacy and Retirement Income the opportunity was lost. It is hard to for employer-based 401(k) plans is (2013). Specifically, these are the longevity imagine that, retrospectively, compulsory voluntary, and no national clearing risk that may see an individual outliving annuitisation could now be imposed. New house is proposed. The WorldatWork and their capital; the risk of loss through poor Zealand’s annuities market is virtually American Benefits Institute (2013) notes investment; and the inflation risk (Cooper, non-existent, and under current tax rules that: ‘Ultimately, companies without 2014). Older people using capital too and lack of government support, including auto enrolment are more likely to report early in retirement and requiring a state inflation indexing or long-term bonds, lower employee participation rates subsidy for long-term care is also a risk for a viable annuities market is unlikely to than those with automatic enrolment.’ society. emerge (St John, 2009). When employees change jobs, 401(k) In other countries there are emergent However, there are now opportunities plans must be either retained with the issues with the risks of the period of for innovative thinking. New Zealand has former employer or transferred, giving decumulation. The UK has until recently a unique opportunity, with a largely tax- an additional complexity not faced by required mandatory annuitisation of neutral TTE regime for accumulation, to KiwiSaver members. lump sum savings from subsidised design an explicit subsidy to recognise the

Page 32 – Policy Quarterly – Volume 10, Issue 3 – August 2014 gains to society from annuitisation, with Labour Party, the Mäori Party and New supplant the role of employer-subsidised few of the disadvantages of traditional Zealand First have suggested that making superannuation and retail schemes. While tax incentives. One of several possibilities KiwiSaver compulsory would create this may have an ambiguous effect on total is the provision of a tax-subsidised more household saving and help solve saving (Savings Working Group, 2011), limited value, inflation-adjusted, gender- New Zealand’s economic problems. The the scheme should not be judged on its neutral annuity to supplement NZS, framework for compulsion is in place; presumed macroeconomic effects. purchased out of lump sum savings, the major changes needed would be to One of the clear advantages of including a suitable share of home equity remove the opt-out and the contributions KiwiSaver is that it is fully portable. This if required (St John, Dale and Ashton, holiday provisions. is facilitated by the unique tax identifier 2012). Let’s call this annuity ‘KiwiSpend’ There are two principal concerns and the Inland Revenue Department and imagine it as a generic product like about compulsion. First, it is undesirable acting as the clearing house. It is also KiwiSaver where private providers may to force those who cannot afford to save inclusive, and the minimal tax incentives play a role. Like KiwiSaver, KiwiSpend into the scheme, but it is difficult to have been designed to limit regressivity. would be regulated by the Financial design exemptions that are fair. Second, The major focus now ought to be firmly Markets Authority. It would require there will be inevitable pressures to on improving the outcomes of security considerable state oversight, maybe even integrate KiwiSaver with NZS. Given in retirement for those who have not state provision, and subsidies to ensure the contribution that taxpayers make to traditionally enjoyed the advantages of that the annuity is inflation-proofed, the accumulation of KiwiSaver benefits, work-based plans. If the needs of formerly has low fees and the same capital cost it would seem logical that a future disenfranchised people, including many for women and men, and includes long- government might link KiwiSaver and women and other disadvantaged groups, term care insurance. As outlined in St NZS, either directly with the kind of are placed at the centre, the decumulation John, Dale and Ashton (2012), a retiree’s offset suggested recently by Sir Michael of KiwiSaver must be designed primarily private saving, including KiwiSaver, could Cullen (2013), or through a general to achieve meaningful amounts of be used to buy an inflation-adjusted means test much as in Australia. This may extra, secure income for them to annuity of up to $10,000 per annum, undermine the advantages of a universal supplement the state pension, regardless with an insurance rider that provides a pension, although there is a case that can of how long they live. New Zealand has trebling of the annuity if the recipient is be made for more claw-back on NZS a unique opportunity to design a generic assessed as needing residential long-term using the tax system (St John, 2012). KiwiSpend decumulation product that care. Success in New Zealand in designing Evidence from Australia suggests adopts some of the clever features of such a product would once more attract that compulsion has not stopped KiwiSaver, possibly also incorporating considerable international attention. offsetting borrowing that sees retirees long-term care insurance (Retirement reach retirement with more debt. Also, Policy and Research Centre, 2012). If The dangers of compulsion Australians seem to retire earlier and successful it would be likely to become a The economic success of Australia is often collect their compulsory retirement beacon of light in an increasingly complex attributed to the fact its superannuation savings as a lump sum. Compulsion, international pensions’ world. scheme is compulsory. This is purported including of the employer-matching 1 This article draws on work done in the Retirement Policy to have added to the capital base and contribution, may please people who and Research Centre, Auckland Business School, University encouraged domestic investment and work in payroll and in financial service of Auckland, and in particular St John, Littlewood and Dale (2014). Susan St John was invited to Ireland and the UK in 6 strong growth (Brogden, 2013). Most provision, but would also be seen as an February 2014 to address key stakeholders on the design features of the New Zealand retirement framework. The KiwiSaver schemes by volume of members additional cost to employers. author thanks Bob Stephens and Judith Davey for comments are owned by Australian-based financial on an earlier draft of this article. 2 Ten years in New Zealand after age 20, with at least five of service providers which have profited Conclusion those after age 50. from Australia’s compulsory retirement The New Zealand combination of 3 See http://www.kiwisaver.govt.nz/statistics/ks-annual- statistics.html. savings scheme. Despite the fact that universal taxable floor of income, 4 The best thing the government did during the upswing of the six years preceding the global financial crisis to improve KiwiSaver has been in place only since NZS, combined with a voluntary auto- national saving was to run surpluses. 2007, there are many calls, especially enrolment saving scheme to supplement, 5 It appears that $AUD15 billion in Australia’s SG scheme is sitting in lost or unclaimed accounts. See http://www.thorner. from the industry, to make it compulsory not replace, the universal state pension, co.nz/tag/australian-superannuation-guarantee/. 6 The mining boom is often ignored in these analyses. Other (Financial Services Council, 2014). In the is a successful model with a lot to offer voices are more sceptical see (Ingles, 2009). lead-up to the 2011 election, and now the rest of the world. If current trends in the lead-up to the 2014 election, the continue, KiwiSaver will continue to

References Blake, D., E. Cannon and I. Tonks (2010) Ending Compulsory Brogden, J. (2013) ‘Australia’s superannuation system’, paper presented Annuitisation: quantifying the consequences, London: Pensions at the SuperSize Retirement Income conference, 14 October, Institute, Cass Business School, retrieved from http://www.pensions- Financial Services Council, Auckland institute.org/reports/EndingCompulsoryAnnuitisationConsequences2.pdf

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 33 What Has New Zealand’s Retirement Policy Framework to Offer the International Debate?

Commission for Financial Literacy and Retirement Income (2013) Ministry of Social Development, retrieved from http://www.msd. Focusing on the Future: report to Government, Wellington: govt.nz/about-msd-and-our-work/publications-resources/monitoring/ Commission for Financial Literacy and Retirement Income household-incomes/ Cooper, J.R. (2014) ‘Are defined contribution pension plans fit for purpose Retirement Policy and Research Centre (2012) Spending the Savings, in retirement?’, Seattle University Law Review, 37 (2), pp.511-32 doi:http://docs.business.auckland.ac.nz/Doc/2012-Proceedings- Cullen, M. (2013) ‘The political economy of long-term fiscal planning Spending-the-Savings-Symposium.pdf from a social democratic perspective’, Policy Quarterly, 9 (4), pp.15- Savings Working Group (2011) Saving New Zealand: reducing 20 vulnerabilities and barriers to growth and prosperity, Wellington: Financial Services Council (2014) ‘New Zealanders with a mortgage even Treasury, retrieved from http://www.chinapost.com.tw/business/asia/ keener on compulsory KiwiSaver’, media release, 20 May, retrieved new-zealand/2011/10/01/318365/Fitch-SandP.htm from http://fsc.org.nz/bulletin_display/x_blog_code/544.html St John, S. (2005) ‘Retirement income policy in New Zealand’, Economic HM Treasury (2014) ‘Freedom and choice in pensions’, doi:https:// and Labour Relations Review, 15 (2), pp.217-39 www.gov.uk/government/uploads/system/uploads/attachment_data/ St John, S. (2007) ‘Farewell to tax neutrality: the implications for an file/294795/freedom_and_choice_in_pensions_web_210314.pdf aging population’, Economic and Labour Relations Review, 18 (1), House of Lords (2013) Ready for Ageing?, report of the Select Committee pp.27-52 on Public Service and Demographic Change, http://www.publications. St John, S. (2009) The Annuities Market in New Zealand, Wellington: parliament.uk/pa/ld201213/ldselect/ldpublic/140/14003.htm. Ministry of Economic Development for the Capital Markets Taskforce, Ingles, D. (2009) The Great Superannuation Tax Concession Rort, retrieved from http://docs.business.auckland.ac.nz/Doc/The-annuities- research paper 61, Australia Institute market-in-New-Zealand-prepared-for-the-Ministry-of-Economic- Inland Revenue Department (2011) KiwiSaver Annual Report 4, 1 July Development.pdf 2010–30 June 2011, Wellington: Inland Revenue Department, St John, S. (2012) ‘Fiscal sustainablity in an ageing population: adapting retrieved from http://www.ird.govt.nz/aboutir/reports/research/report- universal provision’, paper presented at the Affording Our Future ks/research-ks-annual-report-2011.html conference, 11–12 December, Victoria University of Wellington, http:// Law, D., L. Meehan and G. Scobie (2011) ‘KiwiSaver: an initial www.victoria.ac.nz/sacl/about/chair-in-public-finance/events/affording- evaluation of the impact on retirement saving’, paper presented at the our-future-conference-2012 52nd NZAE conference, 29 June–1 July, Wellington, http://www.nzae. St John, S., M.C. Dale and T. Ashton (2012) ‘A new approach to org.nz/wp-content/uploads/2011/10/KiwiSaver-An-initial-evaluation-of- funding the costs of New Zealand’s ageing population’, New Zealand the-impact-on-retirement-saving-NZAE-2011.pdf Population Review, 38, pp.55-76 OECD (2011) Pensions at a Glance 2011: retirement-income systems St John, S., M. Littlewood and C. Dale (2014) Now We Are Six: lessons in OECD and G20 countries, Geneva: OECD, retrieved from http:// from New Zealand’s KiwiSaver, Auckland: Retirement Policy and www.oecd-ilibrary.org/finance-and-investment/pensions-at-a-glance- Research Centre 2011_pension_glance-2011-en WorldatWork and American Benefits Institute (2013) Trends in 401(k) OECD (2012) Pensions Outlook 2012, Geneva: OECD Plans and Retirement Rewards, doi:http://www.worldatwork.org/waw/ Perry, B. (2013) Household Incomes in New Zealand: trends in adimLink?id=71489 indicators of inequality and hardship 1982 to 2012, Wellington:

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Page 34 – Policy Quarterly – Volume 10, Issue 3 – August 2014 Michael P. Cameron and Matthew Roskruge

Labour Force Participation and Well-being among Older New Zealanders Introduction The population of New Zealand, along with those of other Superannuation (NZS) at developed countries, is ageing rapidly. The rate of population current levels (Wilson and ageing is unprecedented, with the number of New Zealanders Rodway, 2006; Bascand, 2012; aged 65 years and over projected to increase from 553,000 Treasury, 2013; Buckle and in 2009 to 1.07 million in 2031, and to 1.44 million in 2061 Creedy, 2014), retirement (Statistics New Zealand, 2010). Importantly, the ratio of planning more generally those aged 65 years and over to those aged 15–64 is projected (Jackson, Cochrane and to increase from 0.19 (older people per person aged 15–64) McMillan, 2013), increased in 2009 to 0.34 in 2031 and to 0.43 in 2061. This more than health-care costs (Bascand, doubling of the ratio of older people to those in the prime 2012), potential skills working and income-earning ages represents a dramatic shortages (Robson, 2001), demographic shift which has implications for New Zealand, and other challenges and particularly in terms of the ability to support New Zealand opportunities for employers trying to cope with an ageing Michael P. Cameron teaches in the Department of Economics at the University of Waikato. Matthew Roskruge is with the National Institute of Demographic and Economic Analysis, University workforce (Davey, 2008). of Waikato.

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 35 Labour Force Participation and Well-being among Older New Zealanders

Figure1: Labour force participation rate by age, 1991-2013 and income is not unique to older people, but the addition of ‘unearned 90% income’ in the form of NZS and the social and individual expectations around 80% retirement will change the calculus somewhat (Hurnard, 2005). 70% Higher labour force participation among more recent cohorts of older 60% people may arise through several mechanisms. First, the rate of NZS has 50% fallen from around 76% of the average wage in 1989 to 66% in 2010 (Bell et 40% al., 2010). Alongside this, the recent recession may have kept older people

30% in employment longer as investment income has been reduced and capital

20% lost through finance company failures (Coile and Levine, 2011; Kendig, Wells and O’Loughlin, 2013). Third, as older 10% people are healthier now than earlier cohorts were at the same age, this might 0% 1991 1996 2001 2006 2013 allow them to work longer and capture 55-59 Years 60-64 Years 65-69 Years 70-74 Years both income and non-income benefits of 75-79 Years 80-84 Years 85 Years And Over working. The purpose of this article is to explore the implications of older people’s One of the more important transitions As well as a substantial increase in the increased labour force participation in which will result from these demographic older labour force on a cohort basis, terms of their overall (subjective) well- changes is an ageing of the labour force older people are increasingly choosing being. King and Waldegrave (2009) (Statistics New Zealand, 2006). Two part-time rather than full-time work, as review the theoretical concept of effects contribute to this. First, there is the many choose to delay retirement through subjective well-being in the context of overall ageing of the population. Second, a longer transition involving part-time older people in New Zealand. We note New Zealanders are living longer and, or bridge employment (Cameron 2014; that subjective well-being often involves importantly, living longer in a healthier Cahill, Giandrea and Quinn, 2005; an evaluation of life satisfaction as a physical and mental state (Gorman, Statistics New Zealand, 2008). whole (Keyes, Shmotkin and Ryff, 2002). Scobie and Towers, 2012). Many older These changes in labour force Thus, in this article we use self-reported people want to continue working rather participation among older New life satisfaction as a proxy measure of than retiring at the traditional age of Zealanders suggest differences in the subjective well-being. eligibility for NZS, currently 65 years. retirement decisions between recent Labour force participation rates among and earlier cohorts at the same age. Labour force participation and well-being older people are increasing, as shown in On the one hand, working reduces the The relationship between labour force Figure 1 which presents data from the amount of leisure time for the individual, participation among older people and Census of Population and Dwellings although this may be somewhat offset their well-being has important policy from 1991 to 2013. The proportion of by the enjoyment received from working implications. It is almost inevitable that older people participating in the labour and the social aspects of work and active demand for older people’s labour will force has increased substantially over this engagement (Longino and Kart, 1982). increase due to the demographic effects 22-year period: from 5.8% to 22.5% of Working may also involve physical and/ outlined above. Moreover, as the ratio of those aged 65 years and over; and from or mental exertion that might make the the number of NZS recipients to full-time 21.5% to 46.3% of those aged 55 and individual worse off (although, as noted income earners and taxpayers increases, the over. These trends are not unique to New by Hotopp (2007), this effect is no more affordability of universal superannuation Zealand, with Australia and its states apparent for older workers than for becomes increasingly questionable (Bell following similar trajectories (Temple, younger workers). On the other hand, et al., 2010). Delaying the eligibility for 2014). However, New Zealand currently employment generally provides the superannuation or reducing its real value has one of the highest employment individual with a higher level of income, increase the incentives for older people to rates among older people in the OECD which they can use to satisfy their needs work (Hurnard, 2005). However, it is not (Jackson, Cochrane and McMillan, 2013). and wants. This trade-off between leisure clear a priori what effect these changes

Page 36 – Policy Quarterly – Volume 10, Issue 3 – August 2014 will have on older people themselves. are retired but would rather be working retirement (Cameron and Waldegrave, Will increasing labour force participation (i.e. those who are involuntarily retired). 2009). Using the same 2007 data, both among older people make them better or Remaining in work may also present self-reported physical and self-reported worse off? This question could be answered opportunities for older people to invest mental health status were shown to have objectively by looking at the changes in in social capital, building or maintaining a likely positive relationship with overall income of older people, but important social networks which are important for well-being (Pool et al., 2009). Given the aspects of this change are subjective rather subjective well-being (Helliwell, 2006). importance of health, we investigate than objective, meaning that the broader However, as discussed regarding leisure below the relationship between labour concept of subjective well-being or life opportunities above, there are diminishing force participation and life satisfaction satisfaction is a more appropriate metric. returns to social capital formation from among older New Zealanders, controlling Retirement has been shown to additional time spent at work. It may be for the effects of health status. positively increase life satisfaction among that the amount of work which provides older people (Reitzes, Mutran and Fernandez, 1996; Latif, 2011), especially among those who are resource-rich ... simply comparing the well-being of older people (Pinquart and Schindler, 2007). In apparent contrast, participation in paid who are working with those who are not working or volunteer work has also been shown to increase older people’s life satisfaction will not reveal the ‘true’ difference in well-being (Aquino et al., 1996). However, it is important to recognise that full-time between an individual working and that same and part-time work may exert different individual not working. influences on life satisfaction or well- being. Chang and Yen (2011) show that older people in part-time work have higher life satisfaction than those an optimal amount of income, social Identification strategy not working, while full-time work is interaction and leisure time occurs at less There are two critical methodological associated with lower life satisfaction. than full-time employment. issues which must be overcome in Similarly, Kim and Feldman (2000) Health has critical relationships investigating the effects of labour force showed that bridge employment (part- with both labour force participation participation on life satisfaction or well- time or temporary work which follows and life satisfaction or subjective well- being. First is the role of selection bias. an individual’s career and precedes being. Labour force status affects health, Older people choose whether or not to permanent retirement) is associated with retirement having been shown to participate in the labour market, and it with higher life satisfaction than full- improve mental health status (Mein et al., is likely that those who believe that their time employment (see also Wang, 2007). 2003). In turn, health affects labour force well-being is likely to be increased as a Voluntary retirement has been shown to status, as people with lower physical or result of working will work, while those have no significant relationship with life mental health status are less able to work who believe that their well-being is likely satisfaction (Bonsang and Klein, 2012), (Currie and Madrian, 1999), and older to be reduced by working will choose not while involuntary retirement has been people may prefer to permanently retire to work. Thus, simply comparing the well- shown to be associated with lower life in order to protect their health or make being of older people who are working satisfaction (Herzog, House and Morgan, the most of their remaining life while with those who are not working will not 1991; Cameron and Waldegrave, 2009; healthy (Pond, Stephens and Alpass, reveal the ‘true’ difference in well-being Bonsang and Klein, 2012). 2010). The New Zealand Health, Work between an individual working and that These results may not be as and Retirement survey demonstrated a same individual not working. incompatible as they seem at first glance. difference in the probability of being in Second, as discussed above, any As noted above, older people may prefer the workforce of 17 percentage points analysis of the relationship between labour retirement for the additional leisure between those in good health and force participation and well-being must opportunities that it provides, but may those in ill health (Gorman, Scobie and take account of the critical role of health. also prefer to work in part-time or Towers, 2012). Within a large sample Health affects labour force participation, bridge employment as they transition of New Zealanders aged 65–84 in 2007, as healthier workers are more able to work. into permanent retirement. Thus, poor health was the second most cited However, health has been shown to have permanent retirement may increase life reason (behind family responsibilities) a separate direct effect on life satisfaction. satisfaction relative to working for some for periods of more than one year spent This creates a problem of endogeneity. If older people, particularly those in full- outside the workforce, and the third most we simply investigate the effect of labour time employment, while simultaneously cited reason (behind wanting to do other force participation on life satisfaction reducing life satisfaction for those who things, and reaching the pension age) for while controlling for health, we would be

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 37 Labour Force Participation and Well-being among Older New Zealanders

and Koopman-Boyden, 2009). On Figure 2: Life satisfaction, by labour force status average, physical health was below the

100% standardised mean score, which is not surprising given that this was a sample 90% of older people, while mental health was slightly above the standardised mean 80% score. Just over 17% of the sample was in 70% paid employment, with slightly more than half of those in full-time employment. 60% Most of the sample was aged 65–69 years 50% (56.3%), with 24% aged 70–74 years and Proportion 19.7% aged 75–79 years. Only 40.9% 40% of the sample was male; most (84.5%) 30% owned their own home.

20% Results

10% Figure 2 shows the relationship between life satisfaction and labour force status 0% in our sample. Again, the level of life Working full-time Working part-timeNot working Labour force status satisfaction in the sample overall is very Very satisfied Satisfied Not Satisfied high. Satisfaction is highest among those working part-time (45.9% very satisfied and 47.1% satisfied), followed by those ignoring the fact that health also directly of subjective well-being employed in other working full-time (41.3% very satisfied; affects labour force participation. surveys in New Zealand and elsewhere 50.3% satisfied), and lowest among To overcome both of these issues we (Koopman-Boyden and Waldegrave, those not working (37% very satisfied; use instrumental variables regression 2009). We reduce the ordinal life 52.3% satisfied). However, the apparent (Pearl, 2000; Angrist and Krueger, satisfaction data to a binary variable that differences in Figure 2 tell us little about 2001). This approach requires at least is equal to one only when the respondent whether there is any causal relationship one variable that affects labour force was ‘very satisfied’ and zero otherwise. between labour force status and life participation that does not separately Self-reported health status is satisfaction, and importantly do not affect life satisfaction. We argue that measured using the SF-12 measures control for health status (healthier people gender is one such variable. Men have (Ware et al., 2007). The SF-12 can be are expected to both work more and have higher labour force participation than used to produce two scales, a physical higher life satisfaction). women, and there is no theoretical reason component summary (PCS) and a mental Accounting for selection bias, health why life satisfaction should be higher component summary (MCS), which are status and the endogeneity of labour force among men than women, or vice versa. taken to represent physical health status participation, our econometric results of and mental health status respectively the final model specification are presented Data and methods (Pool et al., 2009). Labour force status is in Figure 3. As expected, self-reported Our data come from a confidentialised defined in terms of part-time or full-time health is highly significant in explaining unit record file (CURF) of the 2008, work. For the purposes of this article we life satisfaction. An additional standard 2010 and 2012 waves of the New Zealand ignore those who define themselves as deviation of self-reported physical General Social Survey (NZGSS): a total of unemployed (who comprise only 0.36% health score is associated with a 5.9% 4242 observations for those aged 65–79 of the sample of those aged 65–79 years), higher probability of reporting being years. The NZGSS collects data on a variety although technically they are part of the ‘very satisfied’. Similarly, an additional of social indicators and demographics. labour force. For most practical purposes standard deviation of self-reported Importantly, the data set includes data on in terms of well-being, there is likely to be mental health score is associated with a life satisfaction, self-reported health status little difference between an unemployed 15.1% higher probability of reporting and labour force status. Life satisfaction is and a retired person, particularly given being ‘very satisfied’. Older people are measured as the response to the question: how few of them there are in the sample. less likely to report being ‘very satisfied’, ‘How do you feel about your life as a whole Overall levels of life satisfaction in the with those aged 70–74 years being 7.5% right now?’ Responses are measured on a sample are very high, with nearly 90% less likely than those aged 65–69 years to five-point Likert scale (1 = very satisfied; of respondents stating ‘very satisfied’ or report this level of life satisfaction, and 2 = satisfied; 3 = no feeling either way; 4 ‘satisfied’. This is similar in magnitude to those aged 75–79 years being 5.8% less = dissatisfied; and 5 = very dissatisfied). other surveys of life satisfaction among likely (though the latter is not statistically This measure is very similar to measures older people in New Zealand (Waldegrave significant).

Page 38 – Policy Quarterly – Volume 10, Issue 3 – August 2014

Of most interest in this article are the Figure 3: IV regression results results for labour force status. Working Working Full- Working Part- full-time is associated with significantly time time Physical Health Mental Health Age 70-74 Age 75-79 lower life satisfaction after controlling 0.2 for selection bias, endogeneity, age and self-reported health status. Compared 0 with older people who are not working, those who are working full-time are 49% less likely to report being ‘very satisfied’ -0.2 with their life, and 21.8% less likely to report being either ‘satisfied’ or ‘very -0.4 satisfied’. The results for working part- Coefficient time are more equivocal. Compared -0.6 with older people who are not working, those who are working part-time are not significantly less likely to report being -0.8 ‘very satisfied’ with their life.

-1 Discussion and conclusion Our results demonstrate that labour force status is strongly associated with life New Zealanders would like to have part- small and medium enterprises which satisfaction among older New Zealanders, time work (Gorman, Scobie and Towers, can face large risks associated with the with those working full-time having 2012). However, despite the increasing retirement of their older workers. As part significantly lower life satisfaction than role that phased retirement plays in of a phased retirement plan, the agency those not working, while those who are retirement transitions for New Zealanders could help the employer with succession working part-time have slightly lower and the desirability of part-time work planning by matching a job seeker (in life satisfaction than those not working. in later life, there is currently little concert with WINZ) with an employer If improvements in well-being (or life government support to help older people that has an older worker who desires satisfaction) are an important policy negotiate this transition. The Careers phased retirement. This would not only goal of government (as inferred in The New Zealand website (www.careers.govt. help the older worker to transition to Social Report 2010 (Ministry of Social nz) offers useful tips for mature workers, retirement, but help the employer to Development, 2010)), this result has but these are targeted more towards find a suitable replacement while the important policy implications. The New older people who are looking to return older worker is still available to pass on Zealand population is ageing, and older to work or continue in employment, not job-specific knowledge and skills. Large people are healthier and increasingly those who are attempting to transition employers are often able to manage these prolonging their labour force involvement. out. Work and Income New Zealand transitions without the assistance of an While improved health has a protective (WINZ) will offer older workers some external agency, but small and medium effect on life satisfaction among older support in finding work. However, it is enterprises could benefit greatly from people, working full-time reduces life difficult to believe that when WINZ has such a service. Finally, an external agency satisfaction according to this NZGSS the option of matching a job vacancy to with the roles described above could data. Helping some older people to avoid people on job seeker support (formerly eventually help New Zealand adopt ‘age the necessity of full-time work could the unemployment benefit) or people management planning’ processes similar potentially substantially improve their on NZS, preference will not be given to to those of the European Union (Naegele well-being. younger workers, given the opportunity to and Walker, 2006), including coordinating Decreases in full-time work among reduce the cost of government transfers. training or re-skilling opportunities for older people could be achieved through A dedicated agency to help older older workers. developing mechanisms for assisting workers into phased retirement would be Helping New Zealanders to actively phased transitions from full-time work to ideal. Such an agency could fulfil multiple manage the transition in employment retirement through a period of part-time roles, including matching unemployed status from working full-time to full or bridge employment (Cahill, Giandrea or underemployed older people to part- retirement through a period of bridge or and Quinn, 2005). Indeed, phased time or bridge employment, and helping part-time employment may have an added retirement is becoming increasingly full-time employed older workers to benefit of allowing a greater number of common both in New Zealand (Dixon manage a transition to part-time or older people who would previously have and Hyslop, 2008) and elsewhere (Kohli bridge employment. There would be permanently retired to remain in paid and Rein, 1991). Moreover, a recent study additional benefits if such an agency was work for longer. If bridge employment found that around 20% of retired older able to work with employers, particularly is easier for older people to find through

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 39 Labour Force Participation and Well-being among Older New Zealanders government-sponsored employment is $302.27 a week before tax, and where would help to reduce the cost (in terms of matching programmes or similar, then this both qualify is $638.46 before tax.1 This well-being) of superannuation changes. will both ease the transition for workers substantial difference may encourage The New Zealand population is ageing who are looking for phased retirement some older people to continue working rapidly, and larger numbers of people are and provide additional opportunities full-time, whereas allowing a smoother reaching the age of eligibility for NZS. for those who would otherwise have left income transition for a couple once one At this important point in their lives, the labour force. Simultaneously, aiding qualifies for superannuation may reduce many older New Zealanders choose to older people to remain in paid part-time full-time employment in favour of part- continue in full-time paid employment (as opposed to full-time) work would not time or bridge employment. Any increase when a transition to part-time or bridge necessarily impede their important roles in costs associated with this may be more employment would increase their well- in volunteering and unpaid caring. than offset by potential savings from being. Others choose to move directly The potential gains from bridge fewer people having financial dependence from full-time employment to permanent employment may differ substantially on social security. retirement, when a period of part-time between men and women, who have There are ongoing debates about the or bridge employment would ease the different retirement aspirations and make long-term affordability of NZS. Should the transition to retirement and improve different transitions from employment to level be reduced, or the age of eligibility well-being. Finding a suitable mechanism permanent retirement (Noone, Alpass be raised, this will create incentives for to assist in these transitions will increase and Stephens, 2010). Unfortunately, the older people to remain in the workforce life satisfaction for older New Zealanders, nature of the analysis presented here for longer. Moving superannuation to and should be an important future policy precludes a detailed exploration of the an income-tested or means-tested basis goal for the New Zealand government. potential differential effects on well- would have the opposite effect. Based on 1 A higher rate may be paid where one partner does not being of labour force status by gender. the results above, to the extent that older qualify, but in that case the superannuation becomes This question clearly warrants attention people remain in full-time employment income-tested. in future research. or substitute part-time employment for Having fewer older New Zealanders full-time employment this will reduce the Acknowledgements in full-time employment and more in well-being of older people. This reduction This research was funded by the Ministry part-time employment will necessarily in well-being should be considered as part of Business, Innovation and Employment require a greater consideration of the of the trade-off in future policy decisions as part of the Making Active Ageing a income support available, including the about changes to superannuation. Cost Reality project (contract UOWX0901), level of and age of eligibility for NZS. savings from reducing the level or delaying led by Peggy Koopman-Boyden of the Some older workers may be working eligibility for NZS will be partially offset University of Waikato. The authors are full-time because they are supporting by reductions in well-being among older grateful to Statistics New Zealand for a younger non-working spouse who is people. Making part-time employment providing access to the NZGSS CURF not yet eligible for NZS. In 2014, NZS a more feasible option for older people data used in this article. for a couple where one of them qualifies

References Angrist, J.D. and A.B. Krueger (2001) ‘Instrumental variables and patterns and bridge jobs, working paper 384, Washington, D.C.: the search for identification: from supply and demand to natural Bureau of Labor Statistics, Department of Labor experiments’, Journal of Economic Perspectives, 15 (4), pp.69-85 Cameron, M.P. (2014) Labour Force Participation Among Older New Aquino, J.A., D.W. Russell, C.E. Cutrona and E.M. Altmaier (1996) Zealanders, 1991–2013, Hamilton: Department of Economics, ‘Employment status, social support, and life satisfaction among the University of Waikato elderly’, Journal of Counseling Psychology, 43 (4), p.480 Cameron, M.P. and C. Waldegrave (2009) ‘Work, retirement and Bascand, G. (2012) Planning for the Future: structural change in New wellbeing among older New Zealanders’, in P. Koopman-Boyden and Zealand’s population, labour force and productivity, Wellington: C. Waldegrave (eds), Enhancing Wellbeing in an Ageing Society: Statistics New Zealand 65–84 year old New Zealanders in 2007, Hamilton: Family Centre Bell, M., G. Blick, O. Parkyn, P. Rodway and P. Vowles (2010) Social Policy Research Unit and Population Studies Centre, University Challenges and Choices: modelling New Zealand’s long-term fiscal of Waikato position, working paper 10/01, Wellington: Treasury Chang, H.H. and S.T. Yen (2011) ‘Full-time, part-time employment and Bonsang, E. and T. Klein (2012) ‘Retirement and subjective well-being’, life satisfaction of the elderly’, Journal of Socio-Economics, 40 (6), Journal of Economic Behavior and Organization, 83 (3), pp.311-29 pp.815-23 Buckle, R.A. and J. Creedy (2014) ‘Population ageing and long-run fiscal Coile, C.C. and P.B. Levine (2011) ‘Recessions, retirement, and social sustainability in New Zealand’, New Zealand Economic Papers, 48 security’, American Economic Review, 101 (3), pp.23-8 (2), pp.105-10 Currie, J. and B. Madrian (1999) ‘Health, health insurance and the labor Cahill, K.E., M.D. Giandrea and J.F. Quinn (2005) Are Traditional market’, in O. Ashenfelter and D. Card (eds), Handbook of Labor Retirements a Thing of the Past? New evidence on retirement Economics, Amsterdam: Elsevier

Page 40 – Policy Quarterly – Volume 10, Issue 3 – August 2014 Davey, J. (2008) Workforce Ageing: an issue for employers, working Ministry of Social Development (2007) Positive Ageing Indicators 2007, paper 08/04, Wellington: Institute of Policy Studies, Victoria Wellington: Ministry of Social Development University of Wellington Ministry of Social Development (2010) The Social Report 2010, Dixon, S. and D. Hyslop (2008) The Employment and Retirement Wellington: Ministry of Social Development Transitions of New Zealanders Aged in their 60s: evidence from Naegele, G. and A. Walker (2006) A Guide to Good Practice in Age LEED, Wellington: Statistics New Zealand Management, Luxembourg: Office for the Official Publications of the Feldman, D.C. (1994) ‘The decision to retire early: a review and European Communities conceptualization’, Academy of Management Review, 19 (2), pp.285- Noone, J., F. Alpass and C. Stephens (2010) ‘Do men and women differ 311 in their retirement planning? Testing a theoretical model of gendered Gorman, E., G.M. Scobie and A. Towers (2012) Health and Retirement pathways to retirement preparation’, Research on Aging, 32 (6), of Older New Zealanders, working paper 12/02, Wellington: Treasury pp.715-38 Helliwell, J.F. (2006) ‘Well-being, social capital and public policy: what’s Pearl, J. (2000) Causality: models, reasoning, and inference, New York: new?’, Economic Journal, 116 (510), pp.C34-45 Cambridge University Press Herzog, A., J.S. House and J.N. Morgan (1991) ‘Relation of work and Pinquart, M. and I. Schindler (2007) ‘Changes of life satisfaction in the retirement to health and well-being in older age’, Psychology and transition to retirement: a latent-class approach’, Psychology and Aging, 6 (2), pp.202-11 Aging, 22 (3), pp.442-55 Hotopp, U. (2007) ‘The ageing workforce: a health issue?’, Economic Pond, R., C. Stephens and F. Alpass (2010) ‘How health affects and Labour Market Review, 1 (2), pp.30-5 retirement decisions: three pathways taken by middle-older aged New Hurnard, R. (2005) The effect of New Zealand Superannuation Eligibility Zealanders’, Ageing and Society, 30 (3), pp.527-45 Age on the Labour Force Participation of Older People, working Pool, I., B. Amey, M.P. Cameron and S. van der Pas (2009) ‘Health, paper 05/09, Wellington: Treasury wellbeing, and “contentment” among older New Zealanders’, in P. Jackson, N., B. Cochrane and R. McMillan (2013) Workforce Koopman-Boyden and C. Waldegrave (eds), Enhancing Wellbeing Participation of Older Workers as an Element of New Zealand’s in an Ageing Society: 65–84 year old New Zealanders in 2007, Retirement Income Framework: a review of existing knowledge and Hamilton: Family Centre Social Policy Research Unit and Population data, Hamilton: National Institute of Demographic and Economic Studies Centre, University of Waikato Analysis, University of Waikato Reitzes, D.C., E.J. Mutran and M.E. Fernandez (1996) ‘Does retirement Kendig, H., Y. Wells and K. O’Loughlin (2013) ‘Australian baby boomers hurt well-being? Factors influencing self-esteem and depression face retirement during the global financial crisis’, Journal of Aging among retirees and workers’, Gerontologist, 36 (5), 649-56 and Social Policy, 25 (3), pp.264-80 Robson, W.B.P. (2001) Aging Populations and the Workforce: challenges Keyes, C.L.M., D. Shmotkin and C.D. Ryff (2002) ‘Optimizing wellbeing: for employers, Winnipeg: British-North American Committee the empirical encounter of two traditions’, Journal of Personality and Statistics New Zealand (2006) Demographic Aspects of New Zealand’s Social Psychology, 82 (6), pp.1007-22 Ageing Population, Wellington: Statistics New Zealand Kim, S. and D.C. Feldman (2000) ‘Working in retirement: the Statistics New Zealand (2008) Transitions from Work to Retirement, antecedents of bridge employment and its consequences for quality Wellington: Statistics New Zealand of life in retirement’, Academy of Management Journal, 43 (6), Statistics New Zealand (2010) Projected population of New Zealand by pp.1195-210 age and sex, 2009 (base)–2061, retrieved 27 May 2013 from http:// King, P. and C. Waldegrave, C (2009) ‘Theoretical background’, in P. nzdostats.stats.govt.nz/wbos/Index.asp Koopman-Boyden and C. Waldegrave (eds), Enhancing Wellbeing Temple, J. (2014) Past, Present and Future of Mature Age Labour Force in an Ageing Society: 65–84 year old New Zealanders in 2007, Participation in Australia: how do regions differ, Melbourne: National Hamilton: Family Centre Social Policy Research Unit and Population Seniors Productive Ageing Centre Studies Centre, University of Waikato Treasury (2013) Affording Our Future: statement on New Zealand’s long- Kohli, M. and M. Rein (1991) ‘The changing balance of work and term fiscal position, Wellington: Treasury retirement’, in M. Kohli, M. Rein, A.-M. Guillemard and H. van Waldegrave, C. and P. Koopman-Boyden (2009) ‘Ageing and wellbeing Gunsteren (eds), Time for Retirement: comparative studies of early in New Zealand – an overview’, in P. Koopman-Boyden and C. exit from the labour force, New York: Cambridge University Press Waldegrave (eds), Enhancing Wellbeing in an Ageing Society: 65-84 Koopman-Boyden, P. and C. Waldegrave (eds) (2009) Enhancing year old New Zealanders in 2007, Hamilton: Family Centre Social Wellbeing in an Ageing Society: 65–84 year old New Zealanders Policy Research Unit and Population Studies Centre, University of in 2007, Hamilton: Family Centre Social Policy Research Unit and Waikato Population Studies Centre, University of Waikato Wang, M. (2007) ‘Profiling retirees in the retirement transition and Latif, E. (2011) ‘The impact of retirement on psychological well-being in adjustment process: examining the longitudinal change patterns of Canada’, Journal of Socio-Economics, 40 (4), pp.373-80 retirees’ psychological well-being’, Journal of Applied Psychology, 92 Longino, C.F., Jr and C.S. Kart (1982) ‘Explicating activity theory: a (2), pp.455-74 formal replication’, Journal of Gerontology, 37, pp.713–22 Ware, J.J., M. Kosinski, D. Turner-Bowker and B. Gandeck (2007) Users’ Mein, G., P. Martikainen, H. Hemingway, S. Stansfeld and M. Marmot Manual for the SF-12 v2 Health Survey, Lincoln, RI: Quality Metric (2003) ‘Is retirement good or bad for mental and physical health Inc. functioning? Whitehall II longitudinal study of civil servants’, Journal Wilson, P. and P. Rodway (2006) ‘Ageing and the long-term fiscal of Epidemiology and Community Health, 57 (1), pp.46-9 position, in J. Boston and J.A. Davey (eds), Implications of Ministry of Health (2013) New Zealand Health Survey: annual update of Population Ageing: opportunities and risks, Wellington: Institute of key findings 2012/13, Wellington: Ministry of Health Policy Studies, Victoria University of Wellington

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 41 Judith Davey

Age Discrimination in the Workplace Age discrimination is often cited as a barrier to participation Age discrimination pervades the entire employment relationship and in work by older people, and the workplace provides the can take a variety of forms. It occurs in most common grounds for complaints of this nature. Age relation to promotion, job allocation, salary differentials, access to training discrimination predominantly affects older rather than and staff benefits (for example, cut-off ages for life assurance cover and long younger groups (although the latter are not exempt), and is service leave). General attitudes, as well often based on myths and stereotyped attitudes about older as inter-staff action such as bullying and exclusion from social activities, can people and older workers which can be easily refuted (Davey, also disadvantage older workers (OGC Consulting, 2013). Age discrimination 2007; Alpass and Mortimer, 2007; Gray and McGregor, 2003). is noted particularly in recruitment Age discrimination as an issue in the workplace is not new. (Australian Human Rights Commission, 2010). Recruitment agents have been It was well documented in Janice Burns’ literature review on shown to apply age biases in deciding mature workers for the Department of Work and Income who to put forward for jobs. Bennington and Wein (2003) talked about ‘collusion’ in 2001 (Burns, 2001) and by Justina Murray in her review between recruitment agencies, human resource staff and managers in Australia, of age discrimination in employment, commissioned by the allowing discrimination to continue. New Zealand Human Rights Commission in 2002 (Murray, Older workers may face particular difficulties when they seek to re-enter 2002). In 2006 the EEO Trust’s Work and Age Survey Report the workforce after redundancy or an showed that 31% of respondents had experienced age absence for other reasons, including elder care (National Seniors Productive Ageing discrimination at work (EEO Trust, 2006). Centre, 2012).

Why does age discrimination happen? Judith Davey is a Senior Associate of the Institute for Governance and Policy Studies and was formerly Director of the New Zealand Institute for Research on Ageing. Her main research focus is the Murray’s review typified age discrimina- policy implications of population ageing. tion in the workplace as the tendency to

Page 42 – Policy Quarterly – Volume 10, Issue 3 – August 2014 stereotype and generalise about attributes, these desirable objectives. and public sector organisations involved skills and abilities on the basis of age and to The New Zealand Positive Ageing in labour market issues and policies. use these stereotypes and generalisations to Strategy further stresses these benefits, Both groups were asked about age inform human resources practice (Murray, describes older people as a ‘valuable discrimination as a possible obstacle 2002). Other explanations include the resource’ and endorses policies that for older people in the workplace. The use of age as a quick and cheap proxy for support ‘productive lives in the economy majority agreed that it can be a barrier, merit assessments; remuneration practices and society’ (Dalziel, 2001). If older although some were unsure and some based on seniority; social and corporate people are unable to contribute their full considered that it was less prevalent preference for youth; and a tendency economic capacity due to discrimination, than previously. Some thought that for younger managers to recruit people their productivity as workers will fall discrimination would become less like themselves. OGC Consulting (2013, below potential; they will be contributing obvious as the labour market tightens due p.31-2) asked candidates for employment less as taxpayers and may be dependent to demographic change or as ‘the victims in New Zealand: ‘what do you think are the on welfare benefits. At the personal level, and perpetrators of age discrimination key causes of age-related discrimination?’ they will be less able to set themselves up themselves age’.1 The responses reflected Murray’s list financially for their old age and they may There was an impression that much but also focused on interrelationships lack the positive sense of social inclusion age discrimination is not overt and may between age groups in the workplace, lack and contribution which can be derived even be unrecognised. ‘Sometimes people of understanding between generations, from high-quality work. don’t know they are doing it. They and a lack of exposure to or experience of employ people like themselves who they working with different ages.

Is age discrimination in the ... it is sometimes unclear whether there is real age workplace a problem? As recognition of the challenges of discrimination or if decisions made by employers population ageing and the benefits of prolonging workforce participation grows, simply reflect the drawbacks of older workers in governments in many developed countries terms of their physical and mental capacities, are adopting policies to increase labour force participation by older people (Beard outdated skills and lack of ability with new et al., 2012). This is on the basis of benefits for society and the economy. Demographic technology. trends suggest that labour and skills shortages will become more pressing as younger people entering the workforce Findings from the Active Ageing project are comfortable with.’ If discrimination is do not balance the numbers retiring. Making Active Ageing a Reality is a research not overt then it is much more difficult to There are social and economic benefits project undertaken through the University combat. ‘Workplaces may be unwelcoming from having an economically active older of Waikato, funded by the Ministry of to older people, but not on purpose, they population. It will contribute to economic Business, Innovation and Employment. may also be unwelcoming to Mäori, Pacific growth and the maintenance of living Objective 2 refers to the contribution of Islanders or women.’ This suggests that standards and also, through taxation, help older people through participation in the ageism in the workplace is an extension to meet the costs of an ageing population. paid workforce. The aim is to identify of attitudes in the wider population and Prolonging workforce participation will practices and policies which either may need to be attacked on a wider basis. also be good for business, which will face encourage or discourage older people’s Negative attitudes may reflect outdated competition for skilled workers, raising participation in paid work, referring in views. ‘[Employers] remember retirement the cost of labour. For individuals, longer particular to participation from age 65. at the age of 60 and have an unconscious lives and better health in later life provide It incorporates a review of relevant New bias about investment in older workers.’ opportunities for prolonging workforce Zealand and overseas academic, policy- The key informants and employers participation. There is considerable related and business literature. In mid- echoed findings from the literature, evidence that participation in meaningful 2013 interviews were carried out with suggesting that the main area where and appropriate work is beneficial to 33 employers and 26 key informants in discrimination against older workers the physical, psychological and financial Auckland, Hamilton, Wellington and exists is in recruitment, especially when well-being of older people (Hinterlong, Christchurch. The employers came from they seek to re-enter the workforce. Morrow-Howell and Rozario, 2007; Ford a range of industries, with workforces Several respondents laid the blame at and Orel, 2005; Jaworski, 2005). In other ranging from under ten to several the doors of recruitment agencies. One words, it is part of active ageing, and age thousand. The key informants represented respondent referred to a discussion at a discrimination is a barrier to achieving professional, commercial, trade union Human Resources Institute conference

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 43 Age Discrimination in the Workplace at which recruitment firms replied that Many employers are concerned about to discrimination on grounds of they simply offer what is palatable to how to terminate the contracts of non- race or sex. Unfavourable treatment employers. performing employees without risk, in of the young and the old has been The respondents suggested that it is the absence of compulsory retirement. persistently justified by appeal to its sometimes unclear whether there is real Murray (2002, p.40) described social utility. age discrimination or if decisions made compulsory retirement as one of the most by employers simply reflect the drawbacks institutionalised and prevalent forms But now demographic and market of older workers in terms of their physical of age discrimination. It was banned in trends, especially the tightening in labour and mental capacities, outdated skills New Zealand by legislation in 1993 which supply, are forcing advanced economies to and lack of ability with new technology. became effective from February 1999. recognise that such attitudes threaten to ‘When you can’t do things because of This was supported by the New Zealand undermine their sustainability. This has your age, the individual might see this Employers’ Federation: ‘The demise of emerged from the dominance of economic as discrimination.’ ‘Stereotypes exist for compulsory retirement should not be seen rhetoric rather than any discussion of a reason, as a result of people’s negative as a difficulty to be surmounted but as an social or moral responsibility (Riach, experiences.’ It is difficult to see what opportunity to think again about how the 2006, p.553). However, it cannot be assumed that market forces by themselves will make the necessary adjustments. Early statements by the [Australian] human rights Legislation to ban age discrimination has and equal opportunity commissioner ... on the been enacted in many countries, including the United States, Australia, Canada, New valuing of older workers as not only a human rights Zealand, Ireland, Finland, Germany, the Netherlands and Japan (Taylor, 2002). issue but also part of good business practice ... Under Council Directive 2000/78/EC of 27 November 2000, member states of the European Union were required to have legislation in place by the end of 2006 to proportion of this reflects preconceptions process of retirement can be managed’ make age discrimination in employment about older people as opposed to genuine (New Zealand Employers’ Federation, and vocational training unlawful.2 performance concerns. Some thought 1998, p.14). Some employers still suggest In the US, the federal Age that older workers may disadvantage that a fixed retirement age would be Discrimination in Employment Act themselves by their attitudes and by beneficial to deal with difficult cases. ‘It is (ADEA) has been in effect since 1968 feeling that they should make way for tricky with under-performance. HR used (OECD, 2006, p.108). The original act younger workers. to say – wait till they retire – but now prohibited discrimination on the basis of A particular concern for employers this is not an option.’ The process has to age for those aged 40 to 65. Subsequent is their need to start planning for the be done well to maintain the integrity amendments raised the upper age limit retention of skills or the phasing out and good name of the firm and to avoid to 70 and then eliminated it altogether, of workers, according to their business accusations of discrimination. It may, ending mandatory retirement for nearly requirements and the ease or otherwise however, involve challenges for managers all workers. of replacing skills and experience. To do and requires good performance reviews In Australia, compulsory retirement this successfully and efficiently requires throughout the working life of each was abolished in the commonwealth employers to know about the retirement staff member. This may be difficult in public service in 2001. The federal intentions of their workers. This, in turn, small workplaces. But, as one respondent Age Discrimination Act was passed in needs ‘honest conversations’ between concluded, ‘It would be a poor business if 2004, the Fair Work Act in 2009, and employers and employees – ‘for the it waited for a specific age to rid itself of there are relevant provisions in the employee to sit down with their employer poor performing employees and it didn’t individual states. Early statements by (to discuss retirement or “staying on” manage poor performance.’ the human rights and equal opportunity intentions) without feeling that their commissioner (FitzPatrick, 1999) on the employment is put at risk – this can be So what can be done about age valuing of older workers as not only a an incentive not to have the conversation’. discrimination? human rights issue but also part of good These conversations are often avoided Formal policy and legislation business practice were echoed in 2012 by employers, on their part, for fear of As Leeson (2006, p.12) said: by the age discrimination commissioner, opening themselves to an accusation of Susan Ryan (Ryan, 2012). She called age discrimination or constructive dismissal. Liberal democracies have been discrimination a waste of human resources There was clear recognition that such much slower in acknowledging the and a threat to the competitiveness and conversations could be tricky and unfairness of age discrimination growth of Australian business. potentially misunderstood by employees. than they have been in squaring up

Page 44 – Policy Quarterly – Volume 10, Issue 3 – August 2014 In the UK the Equality Act 2010 older people in hiring and other (2001, p.40-41) found that 39% of 1012 codified numerous acts and regulations employment-related decisions, such as employers did not believe that the HRA which formed the basis of anti- promotions. Other criticisms of the ADEA was working and most felt that the discrimination law. This legislation has are that it benefits older workers at the legislation was ineffective in preventing the same goals as the EU directives, expense of other workers, and that it has age discrimination in recruitment. whose provisions it mirrors and unintended consequences, such as acting Many believed that employers should implements. It requires equal treatment as a deterrent to employ older workers have free choice in employing staff; that in access to employment as well as private who cannot be fired without litigation. the labour market should be left to its and public services, regardless of the In the UK, Metcalf and Meadows own devices. Later, Wood, Harcourt protected characteristics, which include (2010) reported on surveys of employers and Harcourt (2004) reviewed the HRA age. Previously, regulations which came before and after the new enactments. and found widespread non-compliance. into effect in 2006 made it illegal for an They found some progress, signalling a They linked ongoing age discrimination employer to force anyone to retire on the more objective approach, less explicit use to labour legislation which relies on grounds of age before they were 65 and of age in the recruitment process and less individual litigation for enforcement. gave employers a duty to consider requests likelihood of discrimination. However, In her submission to the retirement from employees who wished to work after this age. So long as employers followed procedures for informing and consulting Critics of anti-age discrimination legislation employees, they could compulsorily retire them at 65 on business grounds but not believe that it does not change employers’ on the grounds of age alone (Metcalf and Meadows, 2010; CROW, 2005). This was behaviour, but simply leads to more subtle and seen as effectively giving employers a ‘get covert ways of discriminating, sending employment out of jail free’ card. The default retirement age in the UK was fully abolished under ageism ‘underground’. the Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011. In New Zealand the Human Rights the improvements for older workers were commissioner’s 2007 review of retirement Act (HRA) came into effect in February found mainly in larger establishments income policy, McGregor (2007) also 1999. Section 22 forbids employers from and the public sector. Flynn also found found shortcomings, commenting that discriminating against suitably qualified that employers were mainly guided by the legislation is predicated on individual job applicants on a number of grounds, short-term market pressures, leaving complaints and this makes it harder to including age. Its provisions apply to all aside equality goals (Flynn, 2010). address systemic ageism. aspects of employment – recruitment, Managers often spoke favourably about Critics of anti-age discrimination selection, remuneration, training, older workers and generally did not legislation believe that it does not promotion, transfers, retirement and resist retaining workers aged 65 plus if change employers’ behaviour, but simply termination – and outlawed compulsory they could contribute human capital and leads to more subtle and covert ways of retirement.3 company-specific knowledge, but none discriminating, sending employment had formalised a process of considering ageism ‘underground’. In the international How effective is legislation in combatting requests except for public sector sphere, Leeson (2006) found that age discrimination in the workforce? organisations. Flynn concludes that the accounts for only a small number of There is controversy in the literature about ‘business case’ approach in the UK had employment discrimination complaints how effective the long-standing ADEA in a limited impact on employers’ practices and the majority of claims are dismissed. the United States has been, with the and was a weak instrument for changing In many jurisdictions a higher prevalence conclusion that it has boosted employment the retirement culture. of discrimination is found in population- rates for workers aged 60 plus by reducing In New Zealand also, despite being based surveys than among formal unlawful terminations, but does not effective in outlawing compulsory complaints (McGregor, 2007). In recent appear to have encouraged many retirement the 1993 legislation did not years only 2% of complaints to the New employers to hire such workers (Johnson, appear to have an immediate effect on the Zealand Human Rights Commission on 2008; Neumark, 2009). The enforcement prevalence of age discrimination. In EEO the basis of discrimination in employment of the ADEA has focused on terminations Trust research, 42% of employers said have been made by people aged 65 plus much more than hiring. There are often that the legislation had had no influence (overall, around 38% of complaints difficulties in establishing that age and 42% some or a little (White, 1999). are employment-related and 11% are discrimination has occurred and evidence The influence was more likely to have on the grounds of age discrimination suggests continued discrimination against been felt in larger firms. McGregor in all areas).4 This is because of worker

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 45 Age Discrimination in the Workplace ignorance of the complaints procedure something about it. Nevertheless, several (FitzPatrick, 1999). Many of the Active and lack of trust, of feelings that the felt that the HRA was too easy to get Ageing interviewees agreed with this incidents are not serious enough and around. There were calls for the law to conclusion. They called for research to fears about job security, especially for be brought up to date, to be clearer and document discrimination and publicity lower-paid and lower-status workers. more specific. to be given to age discrimination cases The bases for complaints in New Zealand There may be scope for tightening which have been successfully prosecuted. have been: declined job due to age; up and clarifying anti-discrimination ‘We almost need a court case to put the detrimental treatment because of age; legislation and for using other wind up employers.’ Such information dismissed or threatened with dismissal employment law in this context. could be used by government, as well as because of age; and forced retirement Suggestions arising in the interviews other agencies, to advocate and educate at age 65. Thus, despite the passing of included use of the Employment Court employers and their organisations on the this legislation, there is evidence, from and the inclusion of anti-discrimination value of older workers and the benefits both the New Zealand and international measures in industrial agreements. of employing them. To encourage less evidence, that it has far from extinguished Another suggestion was to add good discriminatory thinking would require a concerted effort: ‘Not just a couple of commercials.’ Other agencies mentioned which might have a role included Age Con- Legislation against age discrimination has been cern, the Human Rights Commission,6 enacted in several countries but has had limited the New Zealand Institute of Manage- ment, Business New Zealand, chambers success because of the difficulty of identifying age of commerce, employers’ associations and the Council of Trade Unions. But discrimination, because much if it is not overt, several felt that the movement to raise and discriminatory practices are deepseated in awareness of age discrimination and to seek change has to be led by government business culture. agencies. One respondent called for an age discrimination commissioner alongside the EEO commissioner, as there is in Australia. age discrimination in the workforce. employer and EEO requirements to the There was a call for ‘champions’ In the Active Ageing research, key Employment Relations Act 2008.5 Good working against age discrimination informants and employers were asked employer provisions currently apply only within the business community, as well how they thought the New Zealand in the state sector, through the Crown as in the older workforce itself. A role anti-discrimination legislation was Entities Act 2004, the State Sector Act was seen for human resource managers working and if they saw the need for 1998 and the Local Government Act 2002, (and the Human Resources Institute) as any changes or improvements. Few of but these provisions do not encompass educators and enablers, with the potential either group could suggest concrete age (only women, Mäori and people with to educate younger managers. The improvements and there was a general disabilities are specifically mentioned) preponderance of businesses employing view that the legislation is working well (McGregor, 2006). Could good employer fewer than 25 people, often without as far as it can, given the difficulty of provisions, including measures against age professional HR services, increases the defining age discrimination and the fact discrimination, be extended to the private challenge. Public education could also that much of it is covert. Several agreed sector in New Zealand? Should the onus help, with a role for government in this that if penalties were increased, ‘this be on employers to show that their hiring area, to educate employers on the benefits would send the behaviour underground; practices are not discriminatory? The of non-discriminatory processes and to it is very complex cultural and social counterargument, from business, suggests model such provisions in all public sector behaviour’. ‘We should make (the law) that further and tighter regulation would agencies. more consultative and participative and slow down the economy and overload There is no lack of good practice guides less regulatory. Law doesn’t solve things; employers with compliance costs. for employers relating to the employment people need reasons for doing things.’ of older workers, with case studies of They agreed that legislation is needed as What other measures are possible? employers who have harnessed business a sanction and as a normative statement Although legislation can have educative benefits in an age-diverse workforce. In that age discrimination is not to be effects, the Australian Human Rights New Zealand these have been produced tolerated. ‘Need traffic rules to deal with and Equal Opportunity Commissioner by the Equal Employment Opportunities worst cases, but law is not a solution.’ Many concluded that ‘age-based stereotypes Trust (1999), the New Zealand Employers’ employers had no experience of using the must be addressed by education and Federation (1998) and the New Zealand HRA related to age, although most knew information as well as law and policy’ Human Rights Commission (2008).

Page 46 – Policy Quarterly – Volume 10, Issue 3 – August 2014 Overseas examples include publications countries but has had limited success well planned, well managed and suits the by the UK Department of Work and because of the difficulty of identifying needs of older people. In doing this there Pensions (2013), Naegele and Walker age discrimination, because much if it is is a role for government, but also for the (2006), Manpower Inc. (2007) and not overt, and discriminatory practices business community itself and for civil Finkelstein, Roher and Owusu (2013). are deepseated in business culture. These society. issues apply also in wider society, which 1 Quotations in the text are from the verbatim recordings of Conclusion makes it even more difficult to combat interviews, but are not attributed, to preserve confidentiality. Prolonging workforce participation by discriminatory attitudes. Measures against 2 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX :32000L0078:EN:HTML, accessed 12 March 2014. older people is supported for social, age discrimination in the workplace will 3 In these areas age discrimination can affect younger workers. Between 2002 and 2006 nearly 40% of age discrimination economic and business reasons and require more than legislation, although enquiries and complaints to the Human Rights Commission is becoming a policy objective in legislation has its place as a sanction and were from employees aged 40 or under. 4 Recent data kindly provided by the New Zealand Human many developed countries. Increased as a signal to society that such behaviour Rights Commission, Auckland. participation, even at age 65 plus, is is not to be tolerated. Legislation must 5 The Employment Relations Act’s good faith requirements are relevant to human resource strategic plans and bargaining becoming a reality and this is reflected be supported by other policies – public strategies in particular, but not to EEO or good employer provisions. http://live.isitesoftware.co.nz/neon2012/ in the New Zealand trends, but there education and information, aimed at adviceandguidance/crownentitiesadvice/, accessed 12 March are still barriers. Age discrimination employers but also at the rest of society, 2014. 6 The Human Rights Commission has produced material for is one of these. Legislation against age showing the benefits of prolonging employers and workers which sets out the legal requirements discrimination has been enacted in several workforce participation, providing it is and outlines best practice.

References Alpass, F. and R. Mortimer (2007) Ageing Workforces and Ageing Ford, R. and N. Orel (2005) ‘Older adult learners in the workforce’, Occupations: a discussion paper, Wellington: Department of Labour Journal of Career Development, 32 (2), pp.139-52 Australian Human Rights Commission (2010) Age Discrimination: Gray, L. and J. McGregor (2003) ‘Human resource development and older exposing the hidden barrier for mature age workers, Sydney: workers: stereotypes in New Zealand’, Asia Pacific Journal of Human Australian Human Rights Commission Resources, 41 (3), pp.338-53 Beard, J.R., S. Biggs, D. Bloom, L. Fried, P. Hogan, A. Kalache and S.J. Hinterlong, J., N. Morrow-Howell and P. Rozario (2007) ‘Productive Olshansky (eds) (2012) Population Ageing: peril or promise, Geneva: engagement and late life physical and mental health: findings from World Economic Forum a nationally representative panel study’, Research on Aging, 29 (4), Bennington, L. and R. Wein (2003) ‘Does the resume open the door to pp.348-70 age discrimination for older workers?’, Australasian Journal of Ageing, Jaworski, B. (2005) ‘Aging workers, changing value’, Journal of Employee 22 (2), pp.70-5 Assistance, 1st Quarter, pp.22-3 Burns, J. (2001) Literature Review on Mature Workers Programme, Johnson, R. (2008) ‘Employment opportunities at older ages: introduction Wellington: Top Drawer Consultants for Department of Work and to the special issue’, Research on Aging, 31 (3), pp.3-16 Income Leeson, G. (2006) ‘The Employment Equality (Age) Regulations and CROW (2005) The New Law on Age Discrimination: how prepared are beyond’, Ageing Horizons, 5, pp.12-19 employers?, Centre for Research into the Older Workforce briefing McGregor, J. (2001) Employment of the Older Worker, Palmerton North: paper 5, Guildford: University of Surrey Massey University Dalziel, L. (2001) The New Zealand Positive Ageing Strategy, Wellington: McGregor, J. (2006) The Good Employer: getting it right: guidance from Senior Citizen’s Unit, Ministry of Social Policy the equal employment opportunities commissioner, Wellington: Davey, J. (2007) Maximising the Potential of Older Workers (revised Human Rights Commission edn), Wellington: New Zealand Institute for Research on Ageing McGregor, J. (2007) Employment of Older Workers: submission to the Department of Work and Pensions (2013) Employing Older Workers: an retirement commissioner’s 2007 review of retirement income policy, employer’s guide to today’s multi-generational workforce, London: Wellington: Human Rights Commission Department of Work and Pensions Manpower Inc. (2007) The New Agenda for an Older Workforce, EEO Trust (1999) Benchmark Your Workplace Progress on Age, Milwaukee: Manpower Inc. Auckland: Equal Employment Opportunities Trust Metcalf, H. and P. Meadows (2010) Second Survey of Employers’ EEO Trust (2006) EEO Trust Work and Age Survey Report, Auckland: Policies, Practices and Preferences Relating to Age, employment Equal Employment Opportunities Trust relations research series, 110, London: Department for Work and Finkelstein, R., S. Roher and S. Owusu (2013) Age Smart Employer, Pensions and Department for Business Innovation and Skills NYC: compendium of strategies and practices, New York: New York Murray, J. (2002) Age Discrimination in Employment: a review, Research Academy of Medicine and Information Manager, EEO Trust, for the New Zealand Human FitzPatrick, K. (1999) Anti-discrimination Legislation and the Older Rights Commission, Auckland: Equal Employment Opportunities Trust Worker, Sydney: Australian Human Rights Commission Naegele, G. and A. Walker (2006) A Guide to Good Practice in Age Flynn, M. (2010) ‘The United Kingdom government’s “business case” Management, Dublin: European Foundation for the Improvement of approach to the regulation of retirement’, Ageing and Society, 30 (3), Living and Working Conditions pp.421-43 National Seniors Productive Ageing Centre (2012) Barriers to Mature Age Employment: final report of the consultative forum on mature age

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 47 Age Discrimination in the Workplace

participation, report prepared on behalf of the Consultative Forum Riach, K. (2006) ‘Older workers: learning from three international on Mature Age Participation, Canberra: National Seniors Productive experiences’, Social Policy and Society, 5 (4), pp.551-63 Ageing Centre Ryan, S. (2012) Age Discrimination: a waste of human resources, Neumark, D. (2009) ‘The Age Discrimination in Employment Act and the speech to Human Resources Directors Networking Forum, March, challenge of population aging’, Research on Aging, 31 (1), pp.41-68 retrieved from www.humanrights.gov.au New Zealand Employers’ Federation (1998) Employment of Older Taylor, P. (2002) New Policies for Older Workers, Joseph Rowntree Employees and Retirement: a guide for employers, Wellington: New Foundation, Transitions After 50 series, Bristol: Policy Press Zealand Employers’ Federation White, J. (1999) Midwinter Spring: smart business and older workers. New Zealand Human Rights Commission (2008) Valuing Experience: a New Zealand guide to best practice for employers in an ageing practical guide to recruiting and retaining older workers, Wellington: population, Auckland: Equal Employment Opportunities Trust New Zealand Human Rights Commission Wood, G., M. Harcourt and S. Harcourt (2004) ‘The effects of age OECD (2006) Live Longer, Work Longer, Paris: OECD discrimination on workplace practice: a New Zealand case study’, OGC Consulting (2013) Coming of Age: the impact of an ageing Industrial Relations Journal, 35, pp.359-71 workforce on New Zealand business, Wellington and Auckland: OGC Consulting IGPS and SoG Publications 2014 The New Zealand CPI at 100: The New Electoral Politics in History and Interpretation New Zealand: The significance

Very few New Zealanders have lives unaffected of the 2011 Election by the Consumers Price Index, or CPI. It is Around the world there was unusual interest in used by the New Zealand government to adjust New Zealand’s electoral politics during the 1990’s, student allowances, welfare benefits and because of the country’s adoption of the Mixed superannuation; by the Reserve Bank to guide Member Proportional (MMP) electoral system. Since monetary policy; by the old Court of Arbitration, then international interest has lapsed. Yet at the and also by employers and employees, to 2011 election and concurrent referendum, New negotiate wages; and by the media to inform the Zealanders voted to retain the MMP system. Among public about the effects of price changes on their other inquiries, this book asks the question: why? standard of living. Looking back to the 2011 election and before, this Edited by Sharleen Forbes Some authors in this book document the book lays out the current state of the play in New and Antong Victorio New Zealand CPI as a history of conflicting Edited by Jack Vowels Zealand electoral politics. Despite its reservations machinations between unions, employers, about MMP, the National Party has done very public officials and lobby groups. Others well under that system, particularly since 2005, view it as a mirror of domestic social norms with a vote share and polling that brought it well and important international developments within reach of a single party majority in 2014. that eventually developed into a beacon with For these reasons National appears unwilling to considerable public trust. Still others emphasise change the MMP system in ways recommended by its technical evolution, from a crude selection of an independent review conducted by the Electoral prices necessary for a just wage, to a modern Commission. This book explores these questions, indicator of consumer satisfaction and economic as well as others, including voter turnout decline, management. attitudes to welfare reform, women’s representation, changes in Mäori politics, and the growing importance of immigration on New Zealand politics and society.

A VUW Press Publication edited by Sharleen Forbes and Antong Victorio An Institute for Governance and Policy Studies Publication edited by Jack Vowles Publication Date: July 2014. Format: A5 Paperback, pp 288 Publication Date: May 2014. Format: A5 Paperback, pp 276 ISBN 978-0-864-73966-7 Price: $40.00 (plus P&P) ISBN 978-0-475-12414-2. Price: $39.95 (including P&P within New Zealand) Place your order online at vup.victoria.ac.nz Place your order by phone or email. Preference is for payment via credit card, VUW Press but invoices can be issued on request 49 Rawhiti Tce, Kelburn, Wellington, New Zealand Institute for Governance and Policy Studies, Victoria University of Wellington Phone: + 64 4 463 6580 Fax: + 64 4 463 6581, Email: [email protected] Email [email protected] Telephone +64 4 463 6588, PO Box 600, Wellington, New Zealand

Page 48 – Policy Quarterly – Volume 10, Issue 3 – August 2014 Sally Keeling

Later Life in Rental Housing current New Zealand issues

Historically, New Zealand has had relatively high rates of owned’ group dominated by those who rent (Statistics New Zealand, 2013b), but home ownership, with widely held aspirations for mortgage- it also includes the even smaller minority free tenure in later life. As a consequence, examination of of those in residential care. In 2013 home ownership was highest the small but growing numbers of older renters has been for those aged 65–74, but rates have fallen since 2001 for age groups under limited (Nana et al., 2009, p.20). This article draws together 80. Releases from the 2013 census to date local research, commissioned policy development work and provide only a limited breakdown of the comparative evidence to identify the characteristics of older Table 1: Home ownership by age of people in rental accommodation, current and projected issues household head, 2001, 2006, 2013 2001 2006 2013 and potential policy issues. % % % Owners and renters villages (Retirement Villages Association 60–64 years 79.3 79.1 74.9 Housing tenure patterns in New Zealand of New Zealand, 2014). Table 1 shows the 65–69 80.2 79.3 77.3 have become increasingly complicated in percentage of household heads in various 70–74 80.6 79.5 77.5 the last 20 years through the growth of age groups over 60 whose home is owned, 75–79 78.7 78.4 75.9 family trust ownership and the addition with or without a mortgage. This data is 80–84 72.6 74.5 73.1 of options such as licence to occupy mostly constructed in a binary manner 85+ 55.4 59 60.4 (LTO) arrangements in retirement (home owned/not owned), with the ‘not Source: based on Statistics New Zealand, 2013a and 2013c (Note: the time series is interrupted, because the 2011 census was cancelled after the Canterbury earthquakes. Statistics New Sally Keeling is a Senior Lecturer in the Department of Medicine, University of Otago, Christchurch Zealand advises caution, as changes between 2006 and 2013 and former Director of the New Zealand Institute for Research on Ageing, Victoria University of took place over a period longer than the usual five-year gap Wellington. Her main interests are in the social context of ageing and health service development. between censuses.)

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 49 Later Life in Rental Housing: current New Zealand issues characteristics of rental households by with the simple statement that ‘housing older people. Enhancing Wellbeing in an age, meaning that detailed analysis must serves many functions’ (p.98), providing Ageing Society (Koopman-Boyden and depend on 2006 data, which was presented shelter, a store of wealth with both use Waldegrave, 2009) provided a nationally in a BERL report to the then Department and exchange value, and a place of safety representative sample of independent- of Building and Housing (Nana et al., and security, as well as psychological and living adults in the 65–84 age band (King 2009). At that time, 19% of households physical well-being and health and a nexus and Waldegrave, 2009). Housing tenure which had a reference person aged 65 or of social relationships. Thorns makes it is here ‘collapsed’ into owners (over 76% over were renting, 54,220 households in clear that gender and ethnic inequality in of all participants), renters and others. total (ibid., p.19). Between 1996 and 2006 late-life housing tenure reflects lifetime Freehold home ownership was reported there had been a rise of nearly 30% in experiences in the job and property by 69.3% of participants (Waldegrave older renter households in private sector markets. and Cameron, 2009, p.103). There were and central government housing. This The association of renting in later life strong correlations between housing was alongside a fall in the proportions with low income, social disadvantage, tenure and other assets: 70% of renters with local authority landlords, as some economic insecurity and housing mobility reported no other assets, compared to major territorial authorities were reducing is noted in many housing reports (Davey 37.3% of owners. Two-thirds of renters their commitment to housing. While et al., 2004; Howden-Chapman, Signal were satisfied with their economic increases in renting among older people and Crane, 1999). Disadvantages for older standard of living, compared to over 90% were widespread, Auckland showed the renters include reduced security of tenure; of owners. Physical health scores were significantly higher for owners than for renters, but mental health levels showed Piecing together the situation of current and future no significant relationship with tenure (Waldegrave and Cameron, 2009, p.104). older people in New Zealand who are renters Two waves of data on housing tenure shows that they are likely to be a growing minority, (from 2010 and 2012) are available from the New Zealand Longitudinal Study of given the delayed entry to home ownership which Ageing (NZLSA), based on a national sample of 3,317 participants aged between is already evident. 50 and 84 years (Waldegrave, 2014). These showed rates of home ownership over 90%. The NZLSA study confirmed that highest numerical increase, followed by less control over housing costs, repairs, those who rent have lower incomes and Bay of Plenty and Waikato. maintenance and adaptations; and the fewer assets, and score lower on quality The BERL report presented three lack of an asset against which funds may of life and well-being scales. scenarios based on population projections be borrowed for special needs. This can Piecing together the situation of to 2051. They assumed only a moderate be summarised as the availability, current and future older people in New ongoing decline in home ownership, affordability, suitability and quality of Zealand who are renters shows that they which could be considered as conservative rental housing. Davey (2006, p.260) are likely to be a growing minority, given (ibid., p.13). By 2051 the projected identified further issues for older renters, the delayed entry to home ownership numbers of older renter households are including the risk of a lower standard of which is already evident. They can be estimated to rise (beyond the doubling accommodation and a reduced ability to expected to have lower incomes, and of demand estimated by Davey et al. in adapt or modify housing to deal with fewer assets, again following trends of 2004) to a range between 136,400 and changing health maintenance require- life course patterns of socio-economic 168,840 in the three scenarios (see Table ments. There are also concerns regarding inequality (Povey and Harris, 2005). 5.1 in Nana et al., 2009, p.57). the management of rental housing, with Unless there are significant shifts in relatively limited development of a robust public investment in social housing, their Characteristics of older renters social housing sector in New Zealand security of tenure, control over housing Home ownership has long been the which could promote choice and costs and the suitability of their housing preferred type of housing tenure for autonomy in rental housing, and to their needs are also likely to be limited older New Zealanders, and most achieved improved and equitable access to care when compared to home owners. it. In 1993 Peggy Koopman-Boyden’s and support services for older renters. On book exploring the implications of New the other hand, there are some advantages Renting and housing security Zealand’s ageing society included housing of renting: it can relieve older people of The association of renting with lower tenure and wealth, income support and repair and maintenance costs, the upkeep levels of ‘housing security’ has several care services as the central areas for policy of grounds and insurance payments. components. The policy context is investigation (Koopman-Boyden, 1993). For the period 2006–2013 relevant influential. In some European countries David Thorns’ chapter in the book opens data is available from national studies of ‘sitting tenants’ are protected from

Page 50 – Policy Quarterly – Volume 10, Issue 3 – August 2014 eviction and price rises and in some cases 2009 and 2012 for comparisons with housing is occupied by older people. offered lifetime tenancies. In contrast Australian older renters). There has been some consideration of to New Zealand, renting in Europe is a Although some older people are the relationship between rental housing statistical and cultural norm. lifelong renters due to personal choice and the delivery of community-based There are also subjective and psycho- or socio-economic circumstances, others health and care services, in terms of social components of the relationship move from owning to renting following design features, the feasibility of home between housing tenure and family and a change in personal circumstances. Such modifications, and responsibility for household development (Hiscock et al., changes include the break-up of a family ‘healthy housing’, including heating and 2001). Keeling (1998) and Thorns (1993) at the time of divorce, separation or insulation (Croucher, Hicks and Jackson, discuss interpretative approaches to how bereavement; or an unplanned or radical 2006; Howden-Chapman, Signal and older people understand the ‘meaning change in employment status, such as Crane, 1999; Nana et al., 2009). If entry of home’ as distinct from a ‘bricks and redundancy or involuntary retirement. into residential care is discouraged mortar’ interpretation conjured by the Even long-term renters are disadvantaged through ‘ageing in place’ policy settings, use of the word ‘house’. without a housing or other asset base to then providers of rental housing (whether In the same way, ‘ageing in place’ cushion such ‘life shocks’ (Fergusson et private, state or local authority landlords) as a social and policy concept draws al., 2001). need to recognise the need for home-based on theories of place attachment and Housing affordability cycles also services and investment in appropriate ontological security, even though analysis influence housing career pathways and housing to cater for growing numbers of rarely makes explicit comparisons between owners and renters (Schofield et al., 2006; Wiles et al., 2011). Decisions Renters without a housing asset are typically well about moving house in later life are shown to involve highly complex processes of below the threshold for eligibility for the residential ‘residential reasoning’ (Granbom et al., 2014), within which tenure (owning or care subsidy, particularly as this has been raised renting), location, household and social significantly since 2005 ... context are evaluated. Qualitative explorations of ‘ontological security’ among older people (Mansveldt, Breheny and Stephens, 2013) make tenure choices. For instance, relocation to frail and disabled older people. explicit distinctions between the an area with more expensive housing can There is also a policy relationship circumstances of older renters and home result in a change from home ownership between housing tenure and access to the owners. These draw on Sen’s capability to renting that may not be quickly residential care subsidy for those assessed and functioning approach and include reversed (Nana et al., 2009, p.20). as requiring admission to a rest home, material and subjective evaluations of Housing stability over time is a part of hospital or specialist dementia care living conditions. This enabled Mansveldt, security, but is not synonymous with it. facility. For more than 20 years the asset Breheny and Stephens to conclude: While older people who rent housing are and income test applied to the residential ‘Surprisingly, those with most and least outnumbered in the New Zealand context care subsidy has effectively favoured older access to economic resources expressed by home owners, and the preference for renters (Ashton, 2000; Mays, Marney the strongest sense of security, albeit in home ownership may partly relate to and King, 2013; Thorns, 1993). Renters different ways, while those in the its association with well-being, there is without a housing asset are typically well midrange of economic living standards some evidence (e.g. Jatrana and Blakely, below the threshold for eligibility for expressed the highest sense of insecurity’ 2008 and 2014) that renting cannot be the residential care subsidy, particularly (ibid., p.8). Thus, they argue that a high simplistically linked to disadvantage. as this has been raised significantly sense of security may be consistent with since 2005 (see Work and Income New home ownership or, for renters, secure Policy and politics Zealand, 2014 and Ministry of Social dwelling tenure. ‘Our analysis suggests An Office for Senior Citizens report Development, 2014). that what older people are seeking is not subtitled Healthy, independent, connected, Saville-Smith (2013) reviewed the so much the purchasing power of respected provides a framework for policies intersection between housing assets and economic resources, but the management aimed at older New Zealanders. Housing retirement income. She asserts that there of later life unpredictability’ (p.17). Those options feature primarily in the section are significant issues for health and well- who are lifetime renters, or have long on independence (Office for Senior being in later life arising from insecurity experience in managing close to a poverty Citizens, 2013, pp.22-5). Approximately for those who are not home owners. threshold, appear to derive security from 20% of Housing New Zealand tenants are Older renters are less able to keep their adaptive experience (see also Morris, aged 65 and over, with almost half housed housing costs under control in terms in Auckland. Most local authority rental of rent rises. Growing numbers of very

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 51 Later Life in Rental Housing: current New Zealand issues low income older renters present policy in post-earthquake Christchurch have ownership in New Zealand are already challenges in their need for financial been illustrated by Davey and Neale beginning to affect older people, and may and practical support, including a more (2013) and Keeling (2013), including the well accelerate into the future. This will responsive housing benefit system and/or relocation of low-income renters outside require policies to increase the supply of accommodation supplements. greater Christchurch and pressure on the affordable rental housing designed with Nana et al. (2009, pp.14-15) called short-term rental market. Housing issues older households in mind, particularly for greater integration of social support, for older people in rural areas – whether single tenants. Innovative mixtures of health care and housing, taking into owners or renters – are complex, and not private and public rental developments, account changing expectations, values unique to New Zealand (Keating, 2008). including central and local government, and standards concerning the quality and The dominant policy position has private sector and ‘third sector’ landlords, appropriateness of housing. Innovative been premised on the centrality of have a role in this. approaches to planning and design and home ownership (both normative and The inexorable ageing of New increased engagement of users in the aspirational) to support ageing in place, Zealand’s population has reached a development of housing models and over at least the last 20 years. This critical point in terms of planning to advocacy services are required for all dominance may have obscured policy match rental housing supply and demand. sectors of the housing market, and it is awareness of the consequences for older Policy settings surrounding entry to, vital that the needs of renters are not people unable to attain or retain home security within and exit from home obscured by the needs of the majority ownership, who are accordingly subjected ownership in New Zealand have clearly home owners. to the economic and social costs of the dominated housing policy for many years. Regional issues relating to supply rental market. The empirical studies of The predicted growing numbers of older and demand in the rental market are older people in New Zealand emerging renters suggests that more detailed policy dominated by current distortions in the last decade, and reviewed here, attention should be given to this so-called arising in Auckland and Christchurch support the projections and predictions ‘secondary sector’. (Waldegrave, King and Rowe, 2012). The presented in the report by Nana et housing consequences for older people al. (2009), that falling levels of home

References

Ashton, T. (2000) ‘Long term care in a decade of change’, Health Affairs, Howden-Chapman, P., L. Signal and J. Crane (1999) ‘Housing and 19 (3), pp.72-85 health in older people: ageing in place’, Social Policy Journal of New Croucher, K., L. Hicks and K. Jackson (2006) Housing with Care for Zealand, 13, pp.14-30 Later Life: a literature review, York: Joseph Rowntree Foundation Jatrana, S. and T. Blakely (2008) ‘Ethnic inequalities in mortality among Davey, J. (2006) ‘Housing’, in J. Boston and J. Davey (eds), Implications the elderly in New Zealand’, Australian and New Zealand Journal of of Population Ageing: opportunities and risks, Wellington: Institute of Public Health, 5, pp.437-43 Policy Studies, Victoria University of Wellington Jatrana, S. and T. Blakely (2014) ‘Socio-economic inequalities in Davey, J. and J. Neale (2013) Earthquake Preparedness in an Ageing mortality persist into old age in New Zealand: study of all 65 Society: learning from the experience of the Canterbury earthquakes, years plus, 2001–04’, Ageing and Society, 34 (6), doi:10.1017/ report prepared for the Earthquake Commission, http://www.eqc.govt. S0144686X12001195 nz/research/research-papers/earthquake-preparedness-ageing-society, Jones, A., M. Bell, C. Tilse and G. Earl (2007) Rental Housing Provision accessed 30 May 2014 for Lower-Income Older Australians, Melbourne: AHURI Davey, J., V. de Joux, G. Nana and M. Arcus (2004) Accommodation Keating N. (2008) Rural Ageing: a good place to grow old, Bristol: Policy Options for Older People in Aotearoa/New Zealand, Wellington: New Press Zealand Institute for Research on Ageing and BERL Keeling, S. (1998) ‘Treasures on Earth: older people, housing assets and Fergusson, D., B. Hong, J. Horwood, J. Jensen and P. Travers (2001) public policy in New Zealand’, in I. Edgar and A.J. Russell (eds), The Living Standards of Older New Zealanders: a technical account, Anthropology of Welfare, London: Routledge Wellington: Ministry of Social Policy, http://www.msd.govt.nz/ Keeling, S. (2013) ‘Risk, security, and uncertainty: personal reflections’, documents/about-msd-and-our-work/publications-resources/monitoring/ Journal of Gerontological Social Work, 56 (5), pp.383-7, http:// livingstandardssummary.pdf, accessed 30 May 2014 dx.doi.org/10.1080/01634372.2013.809299 Granbom, M., I. Himmelsbach, M. Haak, C. Lofqvist, F. Oswald and S. King, P. and C. Waldegrave (2009) ‘Theoretical background’, in P. Iwarsson (2014) ‘Residential normalcy and environmental experiences Koopman-Boyden and C. Waldegrave (eds), Enhancing Wellbeing in of very old people: changes in residential reasoning over time’, an Ageing Society: 65–84 year old New Zealanders in 2007, EWAS Journal of Aging Studies, 29, pp.9-19 monograph 1, Population Studies Centre, University of Waikato, Hiscock, R., A. Kearns, S. Macintyre and A. Ellaway (2001) ‘Ontological Hamilton, and Family Centre Social Policy Research Unit, Lower Hutt security and psycho-social benefits from the home: qualitative Koopman-Boyden, P. (ed.) (1993) New Zealand’s Ageing Society: the evidence on issues of tenure’, Housing Theory and Society, 18 (1), implications, Wellington: Daphne Brasell Associates pp.50-66

Page 52 – Policy Quarterly – Volume 10, Issue 3 – August 2014 Koopman-Boyden, P. and C. Waldegrave (2009) Enhancing Wellbeing in Schofield, V., J. Davey, S. Keeling and M. Parsons (2006) ‘Ageing in an Ageing Society: 65–84 year old New Zealanders in 2007, EWAS place’, in J. Boston and J. Davey (eds), Implications of Population monograph 1, Population Studies Centre, University of Waikato, Ageing: opportunities and risks, Wellington: Institute of Policy Hamilton, and Family Centre Social Policy Research Unit, Lower Hutt Studies, Victoria University of Wellington Mansvelt, J., M. Breheny and C. Stephens (2013) ‘Pursuing Statistics New Zealand (2013a) Census 2013 QuickStats about housing, security: economic resources and the ontological security of older http://www.stats.govt.nz/Census/2013-census/profile-and-summary- New Zealanders’, Ageing and Society, 1 (22), doi:10.1017/ reports/quickstats-about-housing/home-ownership-individuals.aspx S0144686X13000342 Statistics New Zealand (2013b) Census 2013 QuickStats about housing, Mays, N., J. Marney and E. King (2013) ‘Fiscal challenges and changing http://www.stats.govt.nz/Census/2013-census/profile-and-summary- patterns of need for health and long-term care in New Zealand’, reports/quickstats-about-housing/households-who-rent.aspx Policy Quarterly, 9 (4), pp.35-46 Statistics New Zealand (2013c) Census 2013 Quickstats about national Ministry of Social Development (2014) ‘Residential care subsidy’, http:// highlights, http://www.stats.govt.nz/Census/2013-census/profile- www.msd.govt.nz/about-msd-and-our-work/publications-resources/ and-summary-reports/quickstats-about-national-highlights/home- statistics/statistical-report/statistical-report-2008/supplementary- ownership.aspx benefits/residential.html, accessed 30 May 2014 Thorns, D. (1993) ‘Tenure and wealth accumulation: implications for Mitchell, I. (2013) Greater Christchurch Housing Market Assessment, housing policy’, in P. Koopman-Boyden (ed.), New Zealand’s Ageing Livingston and Associates Ltd for Greater Christchurch Recovery Society: the implications, Wellington: Daphne Brasell Associates Strategic Partners and Ministry of Business, Innovation and Waldegrave, C. (2014) Income, Assets, Poverty and Housing Tenure: Employment, http://www.greaterchristchurch.org.nz/News/PDF/ summary report for the New Zealand Longitudinal Study of Ageing, chchHousingMarketAssessment27August2013.pdf Family Centre Social Policy Research Unit, Income_Poverty_Assets_ Morris, A. (2009) ‘Living on the margins: comparing older private renters and_Housing_NZLSA_2014.pdf and older public housing tenants in Sydney, Australia’, Housing Waldegrave, C. and M. Cameron (2009) ‘Income, assets, living standards Studies, 24 (5), pp.693-707 and housing’, in P. Koopman-Boyden and C. Waldegrave (eds), Morris, A. (2012) ‘Older social and private renters, the neighbourhood, Enhancing Wellbeing in an Ageing Society: 65–84 year old New and social connections and activity’, Urban Policy and Research, 30 Zealanders in 2007, EWAS monograph 1, Population Studies Centre, (1), pp.43-58 University of Waikato, Hamilton, and Family Centre Social Policy Nana, G., F. Stokes, S. Keeling, J. Davey and K. Glasgow (2009) Trends, Research Unit, Lower Hutt Projections, Issues and Challenges: older renters 1996 to 2051, Waldegrave, C., P. King and E. Rowe (2012) Aucklanders 50 and Over: report to the Department of Building and Housing, Wellington: BERL a health, social, economic and demographic summary analysis of Office for Senior Citizens (2013) Older New Zealanders: healthy, the life experiences of older Aucklanders, report prepared for the independent, connected and respected, Wellington: New Zealand Auckland Council, Research, Investigations and Monitoring Unit, Government Wellington: Family Centre Social Policy Research Unit and Elizabeth Povey, D.M. and U. Harris (2005) Old, Cold, and Costly? A survey of Rowe, Elizabeth Rowe Consulting, http://www.aucklandcouncil.govt. low income private rental housing in Dunedin, 2004, Dunedin: nz/EN/planspoliciesprojects/reports/technicalpublications/Documents/ Presbyterian Support Otago aucklanders50andoverfullreport.pdf Retirement Villages Association of New Zealand (2014), http://www. Wiles, J.L., A. Leibing, N. Guberman, J. Reeve and R.E.S. Allen (2011) retirementvillages.org.nz/, accessed 30 May 2014 ‘The meaning of ageing in place to older people’, Gerontologist, 52 Saville-Smith, K. (2013) Housing Assets: a paper for the 2013 Review (3), pp.357-66 of Retirement Income, Centre for Research, Evaluation and Social Work and Income New Zealand (2014) http://www.workandincome.govt. Assessment for the Commission for Financial Literacy and Retirement nz/individuals/brochures/residential-care-subsidy.html, accessed 30 Income May 2014

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 53 Peggy Koopman-Boyden and Sheena Moosa

Living Alone as a Lifestyle of Older People in New Zealand policy implications

Introduction the motivations of older New Zealanders In many societies adults of various ages are adopting a (aged 65 and over) who live alone, and the strategies they adopt to make their solo new lifestyle of living alone which is often characterised lifestyle meaningful. by independence, self-sufficiency, freedom and Living alone is usually referred to as residing in a ‘single-person household’ alternative living, yet is also seen as hedonistic, selfish and as a ‘solo dweller’ (Dickens et al., 2011; Klinenberg, 2012). While living in this individualistic. No previous societies have supported so way is often seen as contributing to many people living alone, for living alone may not be a social isolation and loneliness, it does not necessarily mean that the person is desired survival goal at societal level (Roseneil, 2006). In socially alone. Research in the United many modern societies a significant number of middle- Kingdom and elsewhere has found that, while nearly everyone who was isolated aged and older people are living alone as a result of smaller lived alone, not everyone who lived alone was isolated (Rolls et al., 2010). In modern families, relationship break-ups or the death of a spouse societies we now have people living alone or partner. This article examines the development of this (physically) but with a spouse or partner residing elsewhere with whom they have phenomenon, including the possibility of it becoming a social contact (living apart together or LAT) (Reimondos, Evans and Gray, 2011). more dominant lifestyle for older people, while exploring Similarly, there are singletons who live alone but have many social contacts and Peggy Koopman-Boyden is currently Senior Fellow in Social Gerontology at the National Institute of Demographic and Economic Analysis at the University of Waikato, working on research activities and are not lonely (Birnholtz programmes related to ageing. and Jones-Rounds, 2010). Thus, in Sheena Moosa is a PhD student. studying the phenomenon of living alone

Page 54 – Policy Quarterly – Volume 10, Issue 3 – August 2014 a distinction must be made between living Figure 1: Household composition in New Zealand, 2001, 2006, 2013 alone physically and living alone socially, which makes the reasons for living alone 80% more plausible and acceptable to the 70% proponents of the ideal of ‘man as a social 60% being’. Furthermore, Klinenberg notes that those who live alone ‘compensate for 50% lowered social contact in the household 40% by being more socially active, and cities 30% with high numbers of singletons enjoy a 20% thriving public culture’ (Klinenberg, 2012, p.9). As well, a number of people living 10% alone enjoy the at-home companionship 0% of a pet or, in a technologically-wired One Family Two or more Other Multiperson One-Person Household Family Household Household Household world, a robot (Melson et al., 2009). In this article the focus is on living alone 2001 2006 2013 physically without any other person, but Source: Statistics New Zealand, 2013 allowing the presence of pets or other forms of companionship devices, and 74% of those living alone are women from situations where people have never where the older person is not necessarily (Figure 2c). cohabited or there has been a dissolution socially alone. of a marriage or co-habitation. Reasons for living alone Unlike young and middle-aged adults, Trends in living alone At the societal level, living alone can be the current cohort of older people in New Demographic trends and changes in seen as a sign of individualism encouraged Zealand have usually been married. For household composition indicate that by industrialisation, mass urbanisation them living alone is often not by choice, there is a growing proportion of people and the empowerment of women. but rather due to the loss of a spouse living alone in adulthood in Europe, the Furthermore, advances in communication through death or a dependent family UK and the United States. In these and and the technological revolution have member ‘moving on’. There are, however, other developed countries, living alone made contact easier through social media an increasing number of older people among the middle-aged is on the rise and networking. Hence, living alone is not living alone through choice (after divorce (Falkingham et al., 2012; Klinenberg, necessarily as isolating as in previous times. or remaining single), and this number 2012; Sobotka and Toulemon, 2008). In Although the nuclear family is still the norm is likely to increase with the ageing of New Zealand, single-person households in Western culture (de Vaus, 2009; Fokkema younger cohorts who have experience of formed 23.5% of all households in 2013 and Liefbroer, 2008), since the beginning living alone. It has also been found that (Figure 1) and are the fastest growing of the 21st century individualistic activities while most older people do not choose household type, expected to reach 29% have been encouraged from childhood and to live alone to start with, they choose in 2031 (Statistics New Zealand, 2013; throughout adulthood. In today’s family to continue to live alone, this having Bascand, 2010). households children spend a considerable become a ‘natural part of their identity, In New Zealand in 2013, 44% of portion of their time alone, engaged in or something inevitable’ (Portacolone, older people (aged 65 and over) lived in exploring entertainment and social media 2011, p.824). one-person households, a small increase that does not require face-to-face contact. In New Zealand it is possible that the from 2006 (see Figure 2a). Living alone The concept of ‘being alone’ in earlier life policy of ‘ageing in place’ is one of the as an older person is a prevalent lifestyle may become a forerunner to ‘living alone’ determinants of older people being able not only because there are more people in later years. to live alone and stay living alone – i.e. surviving into their older years, but also Living alone for younger adults is not moving in with the family or into because, despite some narrowing, there usually by choice, as they leave the parental residential care. For older people, ageing continues to be a longevity gap between home to seek independence and explore in place may mean ageing ‘in your own men and women. Most older women can their own pathways in life. In Europe, place’ or ‘being able to stay living in an expect to outlive their husbands (having changes in family and marriage values and environment of their choice’ (Robinson, married older men), which results in older individualisation of the life course have 2007, p.3), with support measures to women disproportionately populating led to adults retreating from marriage ‘ensure that housing is adequate and one-person households. Examination (Sobotka and Toulemon, 2008; Daly, appropriate to enhance the wellbeing of 2013 census data for older people 2005), thereby contributing to the rise and health of older people, while also living alone shows that 69% of them are of living alone. Falkingham et al. (2012) promoting independence, choice and women. This gender difference is wider found that in the UK the reasons for living social contact’ (Davey et al., 2004, p.13). in the oldest age groups. At 85 and over, alone among middle-aged adults arise Thus, health, disability and social support

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 55 Living Alone as a Lifestyle of Older People in New Zealand: policy implications

Figure 2: Older people living alone in New Zealand, 2001, 2006, 2013 censuses they can be distinguished by two

(a) Older people (65 years and over) living alone, 2001-2013, by gender (%) unique characteristics: maturity and 90% diminishing reserve (Koopman-Boyden, 1988, p.699). It is these characteristics 80% that determine their motivations and 70% 73% 71% strategies to adopt a particular lifestyle, 69% 60% be it living alone, with family members

50% or in group housing. The concept of ‘maturity’ relates to the person’s life 40% 44% 42% 42% experiences through work and family 30% 31% life, which provide them with wisdom 27% 29% 20% and skills to adapt to life situations.

10% Along with possessing maturity, older people have to cope with ‘diminishing 0% 2001 2006 2016 reserve’ – biological, social, economic Male (% of those 65+ living alone) Female (% of those 65+ living alone) Total (% of those 65+ years) and political. Older people have

(b) Older people (65 – 84 years) living alone, 2001-2013, by gender (%) different abilities (or inabilities) to 90% cope with changes in their health, social engagement, living arrangements, paid 80% and unpaid work, financial situations 70% 72% 70% and civic participation. Within the 67% 60% cohort of older people there is huge

50% diversity in these characteristics which differentiate them from other age 40% 36% 35% 36% groups (Gaymu and Springer, 2010; 30% 33% Këpa, Wiles and Wild, 2011; O’Sullivan 28% 30% 20% and Ashton, 2012).

10% Such diversity could well obscure the levels of satisfaction, well-being and 0% 2001 2006 2016 meaningful life that are currently being Male (% of those 65-84 living alone) Female (% of those 65-84 living alone) Total (% of those 65-84 living alone) explored internationally and in New (c) Older people (85 years and over) living alone, 2001-2013, by gender (%) Zealand. Findings show that people who 90% live alone as a group are not as happy

80% or as satisfied with their lives as those 78% 77% who live with a partner or with others 70% 74% (Merz and Huxhold, 2010; Netuveli et al., 60% 2006). This also applies to older people. 50% A 2007 survey of New Zealanders aged

40% 65–84 showed higher overall levels of satisfaction with life for couples than for 30% 26% 22% 23% people who lived alone or with others 20% (van der Pas, 2009). Even so, a 2012 10% survey showed that 72% of older people 6% 7% 8% 0% living alone never feel isolated (Statistics 2001 2006 2016 New Zealand, 2014b). Male (% of those 85+ living alone) Female (% of those 85+ living alone) Total (% of those 85+ years) Older people who live alone can nevertheless live a meaningful life, even Source: Statistics New Zealand, 2014a though ‘meaningful life’ is difficult needs of older people are assessed and where they can mix with other Mäori (impossible?) to measure and to assess, provided for through a mix of public, of different ages and undertake cultural given its qualitative and subjective nature. community and family-based care. activities (Këpa, Wiles and Wild, 2011). In the Active Ageing research project Nevertheless, the choice of a place to (Koopman-Boyden, 2014),1 the concept live alone may differ according to health Are older people living alone satisfied with of a ‘meaningful life’ for an older person status, financial situation or cultural their life and having a meaningful life? is ‘a life where the person living it has a background. For Mäori the preference While older people have similar sense of purpose or motivation, and a may be to live alone close to a marae human needs to those in middle age, feeling of significance’. Among research

Page 56 – Policy Quarterly – Volume 10, Issue 3 – August 2014 participants in this project who lived Personal activities (self-relationship): self- older people living alone can provide the alone, almost all agreed that their life had care – doing things by/for themselves; opportunity and freedom to learn a new ‘meaning’. They may not have been totally personal care, exercise; learning new skill or sport, and to engage in meaningful satisfied with getting older or with living skills; hobbies or sports; household social activities with other people (Yetter, alone, with their housing or mobility, tasks – housework, gardening, 2010). Maintaining control over their lives but they were adamant that their life was cooking; managing daily routine. contributes to the older person’s sense of meaningful in this sense. Social interaction (interpersonal self-esteem and helps to preserve their Many of the older people noted that relationship): contact with family identity, autonomy and dignity (Gillsjö, a solo lifestyle gave them freedom, which and friends, especially grandchildren; Schwartz-Barcott and von Post, 2011; allowed them considerable choice and social clubs/groups; marae Petry, 2008). control in the use of time, resources involvement. Current and suggested policies for supporting (personal and economic) and social Public/community (public relationship): older people living alone engagement. Living alone also provided paid work; volunteering and unpaid In societies with a large proportion of them with the motivation to ‘do what we work; intergenerational activities. older people, many of whom are living want, when we want, and how we want’, In the pursuit of a meaningful life, alone, policies may be developed to enable and they ‘wouldn’t have it any other older people living alone engage in a lifestyle of independent and active living. way’, or had ‘got used to it’ and would strategies to maintain social connectedness In New Zealand such policies include ‘not change now’. Studies in the US and through established interpersonal New Zealand Superannuation, allowing European countries (such as Sweden and relationships with family and friends. for financial independence; ageing-in- Norway) also support this conclusion Having grandchildren provides a family place policies providing support for that freedom and independence are the role and a reason for regular visits. older people to live in their own homes key motivators for continuing to adopt Some choose to live close to a family as long as possible; access to public a solo lifestyle (Gillsjö, Schwartz-Barcott member or close friend, providing the transport through the SuperGold card; and von Post, 2011; Portacolone, 2011; security that someone is available to help and health and housing subsidies. Such Sundsli, Espnes and Söderhamn, 2013). them and stay overnight. It also allows policies recognise both the maturity and Living alone also gave the older people a for companionship and having meals diminishing reserve of older people. ‘feeling of significance’, including an identity together. This arrangement was observed The Active Ageing research asked characterised by being able to manage their in the Active Ageing interviews, especially older people who lived alone to suggest life on their own and engage in activities among older Mäori living alone. Many improvements to existing policies and of their choice, leading to achievement, join clubs that allow them to pursue their new policies (at all levels). The following belonging and being valued. While some hobbies in a social environment. are some of their suggestions. drew significance from past achievements, Older people living alone continue to otherts drew significance from their current have a relationship with the public through Support for financial independence activities when they led to achievements voluntary work. People aged 65 and over While most participants did not have an such as a productive garden or learning constituted 16% of volunteers in 2010, absolute lack of money, several of them to use a new skill (Yetter, 2003; Reichstadt and this grew to 19% in 2012 (Statistics (especially women) expressed the need to et al., 2010; Lundman et al., 2012). New Zealand, 2014c). Older Mäori be able to better manage financial matters Furthermore, engaging in paid or voluntary expect to be involved in intergenerational and/or deal with possible financial abuse. work gives older people living alone a sense activities on the marae, passing on their Policy suggestions included advice on of belonging (Tsang, Liamputtong and cultural practices to younger people. As budgeting and managing finances and Pierson, 2004), being seen as contributing well, many older people continue in the assets; assistance with preparing enduring to the community and rewarded with labour force, with participation rates power of attorney papers; and simpler appreciation, along with the feeling of being for older men increasing from 21.3% in procedures for reporting financial abuse. valued (Dale, Söderhamn and Söderhamn, December 2009 to 27.9% in December Support for health independence 2012; Rolls et al., 2010). 2013, and for women from 11.6% to While older people benefit from a 15.2% in the same time period (Statistics diverse set of health programmes, policy Strategies for living alone as an older New Zealand, 2014d). suggestions from the interviews included person and achieving a meaningful life Although older people may have basic hearing and eye tests in regular health Thus, for some older people, living alone diminishing reserves, at the level of self- checks; doctors who communicate clearly; can be a way of achieving independence. relationships (personal activities) most and wider access to fall prevention tools/ Having attained this, they often establish still do things by and for themselves with measures and appropriate installation. strategies to enable them to achieve a sense of purpose and achievement and a meaningful life (especially at the with self-determination. This includes Supporting emergency preparedness ‘maturity’ level). The solo lifestyle allows managing a daily routine of personal Interviews with older people living alone the development of relationships at three care, maintaining health, household tasks revealed that while they were taking steps levels: and activities of leisure and pleasure. For to prepare for personal health emergencies,

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 57 Living Alone as a Lifestyle of Older People in New Zealand: policy implications many were rather complacent about networks by delivering information about Meaningful life for older people is community emergencies such as social clubs, interest groups, volunteering attained through their freedom and burglaries or natural disasters, with the activities etc., and assisting people to make independence, allowing for the pursuit of attitude ‘I have coped before, I can again’. contact with such groups; programmes/ active ageing and participation. Policy suggestions from the interviews courses for those starting to live alone As the numbers of older people included encouragement to use personal (such as the church-sponsored Widowed, living alone continue to increase, policy health alarms (for example, St. John’s Separated and Divorced programme); a responses are called for. In New Zealand medical alarms, Age Concern life tubes, regular weekly ‘senior’s hour’ for morning the ‘ageing in place’ policy has meant that Eco Lite Dynamo emergency kits) and tea/brunch at local cafés; community- living alone is possible and a viable option house alarms (burglar and smoke alarms, based courses for skill-building in internet even for older people who need support, temperature and flood detectors); regular use, Skype and other new technologies. but the margin of cost-effectiveness fire/smoke alarm compliance checks; and Many of these suggestions could be between this policy and a policy of greater recognition of older people as a initiated through websites, illustrating the institutional care will have to be closely resource in emergencies. need for older people to embrace the new monitored. The introduction of an array technologies, especially when they live of assessment tools (interRAI, Casemix) Supporting housing maintenance alone. should help to ensure this. Older people living alone clearly identified While the aim of New Zealand’s household maintenance as an area that Conclusion public policy for older people is for them needed further policy intervention. While The increasing trend in modern society to be ‘healthy, independent, connected a number had downsized their houses, for adults to live alone arises from and respected’ (Office for Senior Citizens, many were in need of assistance with greater longevity and changes in familial 2013), policies need to recognise the relatively small tasks such as changing a and marital values, and is supported by heterogeneity of current cohorts and light bulb or plumbing maintenance. Policy structural changes to housing, transport match their different expectations of life. suggestions included greater availability and social networking, along with public A longer life expectancy free of disabilities, of single-person, low-maintenance houses policies to encourage ageing in place. A with the maturity of older age and the with small garden plots, and maintenance significant proportion of older people are desire for freedom is resulting in a variety volunteers (e.g. ‘make-over groups’ or in one-person households, and with the of different lifestyles. Public, private and housekeeper robots); an assessment service increasing trend for the middle-aged to community infrastructures may need to for maintenance needs, coordinated with live alone this could become an even more be strengthened to enhance meaningful service providers; and integration of new dominant lifestyle. life for those living alone. Policies need technology in housing units – e.g. alarms, While levels of life satisfaction among to recognise both the maturity and lighting and heating – and support for people living alone (at all ages) are experience of older people by allowing universal design. generally lower than among people who continuity of their chosen lifestyles, while are partnered or living with others, this providing care opportunities for those Supporting social connectedness does not necessarily mean that older with diminishing reserve. While those living alone may have a people are unhappy with their solo status. 1 This paper draws on findings on aspirations for a meaningful reasonable level of social connectedness, Their lives spent living alone can be life among older people living independently from a project maintaining contact and engagement ‘meaningful’ (Koopman-Boyden, 2014) on Active Ageing funded by the Ministry of Business, Innovation and Employment. In 2013–2014, 43 people are extremely important for achieving and many choose to continue living aged 65 and over who live alone were interviewed in focus groups and individual interviews conducted in the Waikato a meaningful life. Policy suggestions alone despite the possible alternatives of region. The participants ranged in age from 69 to 92, included support in building social being with family or in group housing. including six men and 37 women; four people identified as Mäori.

References Bascand, G. (2010) National Family and Household Projections: 2006 Daly, M. (2005) ‘Changing family life in Europe: significance for (base)–2031 update, Wellington: Statistics New Zealand state and society’, European Societies, 7 (3), pp.379-98, Birnholtz, J. and M. Jones-Rounds (2010) ‘Independence and interaction: doi:10.1080/14616690500194001 understanding seniors’ privacy and awareness needs for aging Davey, L., V. de Joux, G. Nana and M. Arcus (2004) Accommodation in place’, paper presented at the CHI 2010 conference, Atlanta, Options for Older People in Aotearoa/New Zealand, Wellington: New Georgia, 10–15 April Zealand Institute for Research on Ageing/BERL for the Centre for Dale, B., U. Söderhamn and O. Söderhamn (2012) ‘Life situation and Housing Research and Evaluation, Ministry of Social Development identity among single older home-living people: a phenomenological- de Vaus, D. (2009) Diversity and Change in Australian Families: hermeneutic study, International Journal of Qualitative Studies on statistical profiles, Melbourne: Australian institute of Family Studies Health and Well-being, 7, doi:10.3402/qhw.v7i0.18456

Page 58 – Policy Quarterly – Volume 10, Issue 3 – August 2014 Dickens, A.P., H.S. Richards, C.J. Greaves and J.L. Campbell (2011) Petry, H. (2008) ‘Aging happens: experiences of Swiss women ‘Interventions targeting social isolation in older people: a systemic living alone’, Journal of Women and Ageing, 15 (4) pp.51-68, review’, BMC Public Health, 11, http://www.biomedcentral. doi:10.1300/J074v15n04_05 com/1471-2458/11/647 Portacolone, E. (2011) ‘The myth of independence for older Americans Falkingham, J., D. Demey, A. Berrington and M. Evandrou (2012) living alone in the Bay area of San Francisco: a critical reflection’, ‘The demography of living alone in mid-life: a typology of solo Ageing and Society, 31 (5), pp.803-28 living in the United Kingdom’, paper presented at the European Reichstadt, J., G. Sengupta, C.A. Depp, L.A. Palinkas and D.V. Jeste Population Conference, Stockholm, 13–16 June, http://eprints.soton. (2010) ‘Older adults’ perspectives on successful aging: qualitative ac.uk/340401/1/Falkingham_et_al._-_The_Demography_of_Living_ interviews’, American Journal of Geriatric Psychiatry, 18 (7), pp.567- Alone_in_Mid-life.pdf. 75 Fokkema, T. and A.C. Liefbroer (2008) ‘Trends in living arrangements in Reimondos, A., A. Evans and E. Gray (2011) ‘Living-apart-together (LAT) Europe: convergence and divergence’, Demographic Research, 19, relationships in Australia’, Family Matters, 87, pp.43-55 pp.1351-418 Robinson, B. (2007) Ageing in Place: making it real, Auckland: Gaymu, J and S. Springer (2010) ‘Living conditions and life satisfaction Presbyterian Support Northern of older Europeans living alone: a gender and cross-country Rolls, L., J.E. Seymour, K.A. Froggatt and B. Hanratty (2010) ‘Older analysis’, Ageing and Society, 30 (7), pp.1153-75, doi:10.1017/ people living alone at the end of life in the UK: research and policy S0144686X10000231 challenges’, Palliative Medicine, 25 (6), pp.650-7 Gillsjö, C, D. Schwartz-Barcott and I. von Post (2011) ‘Home: the place Roseneil, S. (2006) ‘On not living with a partner: unpacking coupledom the older adult cannot imagine living without’, BMC Geriatrics, 11, and cohabitation’, Sociological Research Online, 11 (3), http://www.biomedcentral.com/1471-2318/11/10 doi:10.5153/sro.1413 Këpa, M., J. Wiles and K. Wild (2011) Resilient Ageing in Place Sobotka, T. and L. Toulemon (2008) ‘Changing family and partnership Older Mäori: report and recommendations, Auckland: University of behaviour: common trends and persistent diversity across Europe’, Auckland Demographic Research, 19 (6), pp.85-138, doi:10.4054/ Klinenberg, E. (2012) Going Solo: the extraordinary rise and surprising DemRes.2008.19.6 appeal of living alone, New York: Penguin Statistics New Zealand (2013) 2013 Census quick stats about national Koopman-Boyden, P.G. (1988) ‘Perspectives on the elderly in New highlights, www.stats.govt.nz Zealand’, in The April Report, Wellington: Royal Commission on Statistics New Zealand (2014a) 2013 Census of population and Social Policy dwellings: census night areas (2013) and ethnic group (total Koopman-Boyden, P.G. (2014) Aspirations for a Meaningful Life of Older responses) by age and sex for the number of usual residents in one People Living Alone, Active Ageing project, University of Waikato, person households, aged 15 years and over, customised data, job- report to the Ministry of Business, Innovation and Employment 05278 (forthcoming) Statistics New Zealand (2014b) Safety and loneliness by gender age and Lundman, B., L. Aléx, E. Jonsén, H. Lövheim, B. Nygren, R.S. Fischer, family type, 2012, http://nzdotstats.stats.govt.nz/wbos G. Strandberg and A. Norberg (2012) ‘Inner strength in relation Statistics New Zealand (2014c) Civic participation by family type, age to functional status, disease, living arrangements, and social and strength of feeling of belonging to New Zealand, 2010, 2012 relationships among people aged 85 years and older’, Geriatric NZGS http://nzdotstats.stats.govt.nz/wbos Nursing, 33 (3), pp.167-76 Statistics New Zealand (2014d) Household Labour Force Survey: March Melson, G. F., P.H. Kahn Jr, A. Beck and B. Friedman (2009) ‘Robotic 2014 quarter, http://www.stats.govt.nz/browse_for_stats/income-and- pets in human lives: implications for human-animal bond and for work/employment_and_unemployment/HouseholdLabourForceSurvey_ human relationships with personified technologies’, Journal of Social HOTPMar14qtr.aspx Issues, 6 (3), pp.545-67 Sundsli, K., G.A. Espnes and O. Söderhamn (2013) ‘Being old and living Mertz, E.M. and O. Huxhold (2010) ‘Wellbeing depends on social alone in urban areas: the meaning of self-care and health on the relationship characteristics: comparing different types and providers of perception of life situation and identity’, Psychology Research and support to older adults’, Ageing and Society, 30 (5), pp.843-57 Behavior Management, 6, pp.21-7 Netuveli, G., R.D. Wiggins, Z. Hildon, S.M. Montgomery and D. Tsang, E.Y.L., P. Liamputtong and J. Pierson (2004) ‘The views of older Blane (2006) ‘Quality of life at older ages: evidence from English Chinese people in Melbourne about their quality of life’, Ageing and Longitudinal Study of Ageing (Wave 1)’, Journal of Epidemiology and Society, 24, 51-74, doi: 10.1017/S0144686X03001375 Community Health, 60 (4), pp.357-63 van der Pas, S. (2009) ‘Living arrangements, ageing in place and well- Office for Senior Citizens (2013) Older New Zealanders: healthy, being among older New Zealanders’, in P. Koopman-Boyden and C. independent, connected and respected, Wellington: Ministry of Social Waldegrave (eds), Enhancing Wellbeing in an Ageing Society, Lower Development Hutt: Population Studies Centre, University of Waikato, and Family O’Sullivan, J and T. Ashton (2012) ‘A minimum income for healthy living Centre Social Research Unit (MIHL) – older New Zealanders’, Ageing and Society, 32, pp.747- Yetter, L.S. (2003) ’The experience of older men living alone’, Geriatric 68, doi:10.1017S0144686X11000559 Nursing, 31 (6), pp.412-8

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 59 Charles Waldegrave

Old and Poor or Old and Cared for? Some policy reflections on data from the first two waves of NZLSA

ahead is not guaranteed. They could both be substantially eroded, turning two of Introduction New Zealand’s fine policy achievements It is customary in New Zealand policy circles to assume into a disaster if they are not properly attended to. So the critical policy that older citizens are financially protected by New Zealand challenge is to eliminate child poverty, Superannuation (NZS) and their high rates of home while preserving the gains achieved for older New Zealanders. This requires ownership. Furthermore, it is assumed that families with considerable policy focus, given the demographic changes that New Zealand children are much more at risk of living below one or more is currently undergoing. of the various poverty thresholds. The evidence supports Ageing is a critical driver of the demographic changes taking place in New this belief and there is, of course, an urgent need to address Zealand, as the post-war baby boomers child poverty. However, the status of NZS and home populate the 65-plus age group in large numbers. Projections from Statistics ownership as protective factors for older people in the years New Zealand (middle series) indicate that 100,000 people aged 65 and over will be added to the population every Charles Waldegrave is the leader of the Family Centre Social Policy Research Unit in Lower Hutt, Wellington and coordinator of the Family Centre Päkehä (European) section. He is a principal five years from 2011 to 2036 (Statistics investigator in the New Zealand Longitudinal Study of Ageing (NZLSA) research project. New Zealand, 2007). The 2013 census

Page 60 – Policy Quarterly – Volume 10, Issue 3 – August 2014 has shown that that process has well may enable us to ride the silver wave with income and contributions do not apply and truly begun. During the intercensal all the agility of bronzed surfers. as they do in most other countries. Until period 2006–2013 the population aged The purpose of this article is to recently New Zealand has had a high level 60–64 increased by 30%, those aged 65– present an analysis of the income, poverty, of home ownership, which has allowed 69 by 32% and those 85 years and over by asset accumulation, housing tenure and the vast majority of older people to live 29% (Statistics New Zealand, 2013a). The well-being data in the first two waves in mortgage-free houses. largest increase is expected to take place of the New Zealand Longitudinal Study When non-income indicators of in the decade 2021–2031, when an extra of Ageing (NZLSA) in order to better material living standards are used in 276,000 people are projected to move understand the living standards and surveys, a picture of New Zealanders’ into the older age group (Statistics New experience of well-being for the total material circumstances emerges alongside Zealand, 2005, 2007). The percentage sample 50 years and over, and separately income circumstances. These surveys of those aged 65 and over has increased for those 65 years and over. include questions about ownership of from 12% in 2006 to 14% in 2013, and household durables and their quality, is expected to comprise a quarter of the Income, poverty and housing the ability to keep the house warm population by 2051. Older people in New Zealand are generally and to pay the bills, to afford fruit and This extraordinary demographic shift considered to have an adequate, if not a vegetables, adequate clothing, to pay for a is largely driven by post-war fertility rates, high, standard of living when compared night out, and so on. Interestingly, older advances in medical science, and people with those living in similar countries. This New Zealanders (aged 65 plus) have the living in healthier ways and consequently is largely because of a universal pension most favourable distribution of living living longer. Life expectancy at birth policy, a history of home ownership, and a standards of all age groups. In the most in New Zealand for women is 83 years reasonably accessible, though by no means recent survey carried out by the Ministry and for men 79 years. This represents perfect, health service. NZS is universal of Social Development, applying the an increase of seven years for women and indexed to movements of the average Economic Living Standards Index (ELSI), and nine years for men over the three wage. Hovering around 50% of median the older population has the highest decades 1980–82 to 2010–12 (Statistics disposable household income, it currently mean score and the lowest hardship rate New Zealand, 2014). Policy experts have sits very close to the OECD poverty line (Perry, 2009). This probably reflects the had a field day talking up the threats to and is usually just above it. It is, however, combined effect of NZS and their asset the New Zealand economy and our way well below the European Union income accumulation, including their home and of life, characterising the population indicator of social exclusion, which is 60% other savings. The positive impact of changes as a silver tsunami. The fears of median household disposable income. NZS is demonstrated by hardship figures: have centred largely on the cost of NZS NZS is the right of New Zealand for the 45–64-year-olds the hardship and health costs, as there will be fewer citizens and permanent residents (certain rate is 23%, higher than that of the 65- people of working age to support a larger residential criteria apply) on reaching 65 plus group (4%), despite the fact the number of older citizens. years of age, and is gender neutral in the 45–64-year-olds have the highest overall It is not the purpose of this article sense that work history and the level of incomes. to evaluate these arguments, but suffice to say that a number of the assumptions The ‘silver tsunami’ or ‘catching the silver wave’? of the gloom merchants fail to take into account a range of other factors, including the increasing numbers of people 65 and over in the labour market and paying taxes; the fact that the big spend on health tends to be at the end of life, and this has been delayed rather than elongated; the substantial contribution in family care and voluntary hours made by older citizens; and the simple matter that many of the risks can be planned for and mitigated. A tsunami implies a natural disaster with profoundly destructive consequences. But need we look at it that way? The wave is growing but it stretches over many years. It can be planned for and it will create its own opportunities. As the Economist so cleverly put it, smart policy 4 Feb 2010 | From the Economist print edition

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 61 Old and Poor or Old and Cared for? Some policy reflections on data from the first two waves of NZLSA

Table 1: Gross personal and household median income by age bracket waves 1 & 2 is among those aged 50 years and over; Median Income 2010 2012 the extent of housing tenure differences; 50–87 years Personal $40,232 $34,183 and the relationship of all these to older 65–87 years Personal $24,025 $26,000 people’s experience of well-being and quality of life. Furthermore, what are the 50–87 years Household $67,600 $62,980 implications of these results for future 65–87 years Household $39,634 $46,000 well-being? Source: New Zealand Longitudinal Study of Ageing It is of considerable interest to policy may reduce quality of life among older Methodology makers, and of great concern to older people, as can financial restrictions on The New Zealand Longitudinal Study people and their families, that they activities or access to basic resources and of Ageing began wave 1 with a national have sufficient economic resources to necessities, such as medication or medical random sample of 3,317 New Zealanders maintain a reasonable standard of living. appointments (Gabriel and Bowling, aged between 50 and 84 in 2010, and Poverty studies have demonstrated that 2004; Pinquart and Sorensen, 2000). retained 3,015 participants for the the older population are better protected Other researchers have found a less second wave in 2012. A comprehensive from poverty and hardship than other clear relationship between quality of life postal questionnaire containing scales population groups (Waldegrave, Stephens and financial security, satisfaction or and questions on general health, social and King, 2003; Perry, 2013). This does income. Wilhelmson et al. (2005), in a support, care-giving roles, financial well- not mean they are well off by comparison, Swedish study, found that finances and being, neighbourhood characteristics and but that there are fewer people in serious worrying about finances were the least demographic information was sent to all poverty at the lower income end. These mentioned factors in a quality of life participants. Among the sets of questions same poverty studies also demonstrate survey among the elderly, and were cited used in this study were two well-being the impact of housing tenure. The by only 5% of men and 10% of women (quality of life) scales, a health scale with numbers of households with older in response to an open-ended question physical and mental health components, people living below the poverty threshold ‘what is quality of life?’ Similarly, Depp and a depression scale. These were drops considerably when housing costs and Jeste (2006), in a review of 28 studies WHOQoL-8,1 CASP-12,2 SF-123 and the are taken into account. This is largely due of successful ageing, found that income CES-D-104 scales. Questions concerning to the lower housing costs for the vast and education were not consistently income and housing tenure were asked,5 majority who are mortgage-free. Renters associated with successful ageing. and three poverty measures were used. are much more likely to be in poverty As with income studies, Kohli, than home owners for all age groups. Künemund and Zähle (2005) in their Income In New Zealand Waldegrave and analysis of the Survey of Health, Ageing The results in Table 1 show median Cameron (2007) reported positive and Retirement in Europe (SHARE) personal and household incomes for associations between income and well- database noted that home ownership people 65–87 to be much lower in both being among older people. Research was associated with larger and better waves 1 and 2 than for the total sample (50– in countries similar to New Zealand, homes, and, because mortgage payments 87 years). In 2012 nearly 80% of median including Australia (Headley and usually decrease over time, it contributed personal income for the 65–87 group was Wooden, 2004), the UK (Netuveli et al., to economic and emotional security. derived from NZS, which demonstrates 2006; Gabriel and Bowling, 2004) and Similarly, in a large British study of the how much the older population depends Sweden (Pinquart and Sorensen, 2000; association of quality of life in old age on it. Around 60% of household income Borg, Hallberg and Blomqvist, 2006; Berg with socio-economic position, Breeze et was derived from NZS. et al., 2009), has found similar results, as al. (2004) found that, among respondents The cushioning effect of NZS is has a Taiwan study (Hsu, 2010). Higher who lived independently, owner-occupiers also demonstrated in Table 1. The total levels of income, financial satisfaction were less likely to have poor quality of life. sample lost income over the two waves, and wealth were associated with a Changing tenure to renting in later years, probably because of the ongoing impact better quality of life in old age. Netuveli after most of one’s adult life had involved of the global financial crisis. However, it et al. noted that ‘perceiving financial owner-occupation, carried significantly is interesting to note that if the age 65–87 circumstances to be poor had a very greater chances for three out of five bad sub-sample is looked at independently high effect on lowering quality of life quality of life outcomes, while movement the trend runs in the opposite direction, scores … while owning cars and being from renting to ownership, by contrast, as their incomes increased. This is on the high end of income distribution reduced the chances of two of the bad probably because a substantial amount of improved quality of life scores’ (Netuveli quality of life outcomes. their income derives from NZS, which is et al., 2006, p.360). However, they also In this study we wanted to see: if benchmarked to wage rises and protected found that this association changed over the same patterns of income and asset from most of the impact of market time and was less significant for those 75 accumulation noted above occurred in the fluctuations. years and older. Worrying about finances NZLSA database; how extensive poverty

Page 62 – Policy Quarterly – Volume 10, Issue 3 – August 2014 Poverty Table 2: percentage of 50- to 87-year-olds below different poverty thresholds Three income poverty thresholds were 2010 2012 applied to the data in order to determine Equivalent, disposable, household income 50–87 65–87 50–87 65–87 how many households were experiencing 50% of median 12.5 14.5 11.2 11.8 hardship. These were: 60% of median 22.6 36.7 26.2 30.1 • the OECD 50% of median, equivalent, disposable household 60% of constant value threshold after housing costs estimated at 25% of income 16.3 17.6 19.7 21.1 income measure; • the European Union 60% of median, Source: New Zealand Longitudinal Study of Ageing equivalent, disposable household incidence of poverty for this older group questions of satisfaction, whereas CASP-12 income as applied in the EU as the actually decreased on the straight income identifies broader areas relating to control, income indicator of social exclusion; measures between the two waves. It was autonomy, self-actualisation and pleasure. • the New Zealand constant value the third measure, which takes housing We found significant relationships in threshold benchmarked to 60% of costs into account, that increased, both waves between all three poverty the 2007 median, adjusted for the probably reflecting a proportional climb measures and the well-being scales, with cost of living for each subsequent in housing costs in 2012. substantially lower well-being scores year. Housing costs are estimated to for those below the poverty threshold.6 be 25% of household income (Perry, Housing tenure Interestingly, the WHOQoL-8 and CASP- 2013). Home ownership for the total sample of 12 well-being responses both produced For people aged 65–87, the NZLSA 50–87-year-olds was very high in both similar results. data show a decrease in poverty between waves, as the owned with and without a We then went on to test the 2010 and 2012 on the two totally relative mortgage and the family trust categories relationship of those above and below measures, and an increase in the constant in Figure 1 show. These three categories the 60% constant value poverty threshold value after-housing-costs measure. Table totalled 90% in 2010 and 91% in 2012. applying the SF-12 physical and mental 2 shows that for the 50% of median Only 8.5% were renting or boarding in health scales and the CES-D-10 depression household disposable income threshold, 2010 and 7.7% in 2012. scale for both waves 1 and 2. Again, we poverty decreased from 14.5% to 11.8%, found significant relationships between and for the 60% measure poverty Well-being and health the poverty threshold and both the health decreased from 36.7% to 30.1% over We tested the relationships for the total and depression scales, with substantially the two-year period. The constant value sample between those above and below all lower health and higher depression scores measure that takes housing costs into three poverty thresholds in waves 1 and 2 for those below the poverty threshold.7 account demonstrated an increase in with well-being and quality of life measures, We decided to further investigate poverty over the same period from 17.5% applying two well-used, internationally- the impact of poverty on well-being by to 21.1%. applied scales, WHOQoL-8 and CASP- estimating a linear regression, using well- The impact of high home ownership 12. WHOQoL-8 focused primarily on being as the dependent variable and data and consequent lower housing costs among the older population is illustrated Figure 1: Housing tenure in 2010 and 2012 in the third measure. The poverty levels are considerably lower than for the 1.7 0.9 0.9 1 second measure, which is simply based on 60% of median household income, 7.6 without adjusting for housing costs. For 6.7 the total sample of ages 50–87 years, 29.1 23 households below the 50% of median 15.9 17.4 poverty threshold decreased between 2010 and 2012 from 12.5% to 11.2%. However, for the 60% mark the proportion of households in poverty increased (22.6% to 26.2%), and for the third measure the 44.9 50.9 proportion also increased, from 16.3% to 19.7%. The poverty rates of the sub-sample of 65-plus years were higher than for the 2010 2012 total sample on every measure, although Owned with Owned without Owned by Rented None listed/ Other in some instances the differences were mortgage mortgage family trust Boarding small. Despite this, as noted above the Source: New Zealand Longitudinal Study of Ageing

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 63 Old and Poor or Old and Cared for? Some policy reflections on data from the first two waves of NZLSA

Table 3: Private dwelling by household being below a poverty threshold and of almost 10% in home ownership over tenure (%) the reduction of well-being/quality of the last 22 years. There is no sign that Owner- life, physical and mental health and this trend is arresting. Furthermore, the Census occupied11 Rented depression. Low incomes and low asset current provision of social housing in 1991 73.6 23.1 accumulation were consistently associated New Zealand is not adequate to protect 1996 70.5 25.6 with low levels of well-being, low levels the numbers of older people expected to 2001 67.8 29.0 of physical and mental health and higher be renting in their later years (Housing levels of depression. The housing tenure Shareholders Advisory Group, 2010). 2006 66.9 28.9 variable was not as consistent, but it did If older people drop below the 2013 64.8 31.2 show an association with depression. poverty threshold in larger numbers in Source: Statistics New Zealand, 2013b The income and poverty results in the future, it can be expected that their we had on poverty, asset accumulation this study show that a not insubstantial quality of life will reduce and their health and housing tenure as the three number of older citizens drop below each will deteriorate. Currently we have a independent variables, for waves 1 and of the standard poverty thresholds. The very serious problem with the levels of 2. The results applying the CASP-12 scale numbers below the threshold range from child poverty in New Zealand, and every showed a significant negative association 12% to around a third depending which effort needs to be made to address it. It between poverty and well-being and a measure is applied. Furthermore, the is important, though, that the quality of significant positive association between median income results demonstrate how life older people have experienced in New asset accumulation and well-being.8 reliant many of those above the lines are Zealand is not compromised by neglect Those below the poverty threshold and on NZS for their current living standards. of the threats that lie ahead. People those with fewer assets had lower well- Given the substantial demographic shift at both ends of the life cycle require being scores. that New Zealand and most countries attention because they are so much more Finally, we estimated two linear are currently undergoing, there is cause vulnerable than most of the population regressions using physical health as the for concern. By 2050 around a quarter between them. Policies for older New dependent variable for the first and the of the population are expected to be 65 Zealanders need to focus on income depression scale for the second, and years or older. Questions concerning the stability through a combination of saving the three factors as the independent savings behaviour of New Zealanders and incentives and ensuring NZS maintains its variables, for waves 1 and 2. The results the sustainability of NZS are being raised value relative to average earnings. Policies applying the SF-12 physical component (Stroombergen, 2013; Commission for also need to focus on future housing need and CES-D-10 scales showed similar Financial Literacy and Retirement Income, as home ownership declines. KiwiSaver significant associations with poverty and 2013). There are some serious threats and is making an important contribution to asset accumulation. The association with challenges for the ‘baby boomers’ as they savings. Attention could also be given to housing tenure was not significant for age, and it is not a good omen that the making NZS sustainable by a resumption physical health,9 and significant, but not New Zealand government has taken a of contributions to the New Zealand strong, for depression.10 six-year holiday from contributing to the Superannuation Fund. Finally, the stock New Zealand Superannuation Fund. The of social housing will need to be built up Discussion and policy implications fund was designed specifically to enable substantially if it is to have the capacity The well-being or quality of life of citizens a smoother transition to a time when a to provide adequate accommodation for is a primary goal of social and economic greater proportion of GDP will have to older people who can be expected to policy. In this study two quite different be set aside to support a vastly increased require it in the future. well-being/quality of life scales were number of superannuitants. 1 WHOQoL-8 is a World Health Organisation quality of applied and both demonstrated similar Nor does the trend of reducing home life instrument that assesses subjective well-being. Eight results, showing that when older people ownership, as displayed in Table 3, offer questions inquire into participants’ satisfaction with various aspects of their health and physical and social lives. A drop below a recognised poverty threshold any comfort. Mortgage-free homes have five-point scale is used, ranging from very satisfied to very dissatisfied. their quality of life reduces. been critical to preventing many older 2 CASP-12 is a quality of life measure of well-being developed Good health is another major goal New Zealanders from dipping below the for older people which spans four domains of control, autonomy, self-realisation and pleasure (hence CASP). Twelve of social policy, and ill-health impacts poverty threshold when they cluster so questions inquire into the four domains, using a four-point close to the internationally-set poverty scale ranging from often to never. severely on fiscal policy and government 3 The SF-12 is a generic health status measure of health costs. Likewise, depression is a state of lines. outcome in a wide variety of patient groups and social surveys. It was developed from the SF-36 to enhance mind that leaves people more susceptible The census housing tenure data response rates by reducing patient burden without decreasing to mental and physical ill-health and demonstrate the emerging problem. In reliability. The 12-item questionnaire has two components: a physical component summary score (PCS) and a mental a negative view of their quality of life. future a larger number of older people will health component summary score (MCS). 4 The CES-D-10 scale is a short, self-report scale designed These results reveal the negative impact not own their own home and are likely to to measure depressive symptomatology in the general of poverty on health status. be much more subject to rental market population. The items of the scale are symptoms associated with depression which have been used in previously- There are consistent, statistically prices and fluctuations than older citizens validated longer scales. today. Table 3 demonstrates a decrease 5 Care was taken to separate pre- and post-tax incomes, significant relationships between and individual and household incomes. A question on

Page 64 – Policy Quarterly – Volume 10, Issue 3 – August 2014 the composition of each household was asked, enabling <0.001, as did the SF-12 mental health and the CES-D-10 the housing tenure coefficient showed no significant equivalence scales to be used. The scale applied to the depression scores. relationship in 2010 and 2012. household income data was the Jensen Revised Equivalence 8 The F-test statistic had a p-value of <0.001 for both waves. 10 The F-test statistic had a p-value of <0.001 for both waves Scales (Jensen, 1988), which are the most commonly used This tested the whole model. The T-test of significance of testing the whole model. The T-test of significance of the in New Zealand. The question on housing tenure offered the poverty and asset accumulation tenure coefficients in poverty and asset accumulation coefficients in front of each three ownership options (owned without a mortgage, owned front of each variable had a p-value of <0.001 for both variable had a p-value of <0.001 for both waves. The with a mortgage and owned by a family trust) and three non- waves. However, the housing tenure coefficient showed no housing tenure coefficient showed a p-value of 0.001 in ownership options (renters, boarders and other). significant relationship in 2010 and 2012. 2010 and 0.036 in 2012 . 6 50% of median, equivalent, disposable household income – 9 The F-test statistic had a p-value of <0.001 for both waves 11 Includes dwellings owned by individuals or held in a family T-test statistic had a p-value of <0.001, as did the other two testing the whole model. The T-test of significance of the trust (from 2006). measures for both well-being scales. poverty and asset accumulation coefficients in front of each 7 SF-12 physical health – T-test statistic had a p-value of variable had a p-value of <0.001 for both waves. However,

References Berg, A.I., L. Hoffman, L.B. Hassing, G.E. McClearn and B. Johansson the English longitudinal study of aging (wave 1)’, Journal of (2009) ‘What matters, and what matters most, for change in life Epidemiology Community Health, 60, pp.357-63, doi: 10.1136/ satisfaction in the oldest-old? A study over 6 years among individuals jech.2005.040071 80+’, Aging and Mental Health, 13 (2), pp.191-201, doi: Perry, B. (2009) Non-income Measures of Material Wellbeing and 10.1080/13607860802342227 Hardship: first results from the 2008 New Zealand Living Standards Borg, C., I. Hallberg and K. Blomqvist (2006) ‘Life satisfaction among Survey, with international comparisons, working paper 01/09, older people (65+) with reduced self-care capacity: the relationship Wellington: Ministry of Social Development to social, health and financial aspects’, Journal of Clinical Nursing, Perry, B. (2013) Household Incomes in New Zealand: trends in 15, pp.607-18 indicators of inequality and hardship 1982 to 2012, Wellington: Breeze, E., D.A. Jones, P. Wilkinson, A.M. Latif, A. Bulpitt, A. and E. Ministry of Social Development Fletcher (2004) ‘Association of quality of life in old age in Britain Pinquart, M. and S. Sorensen (2000) ‘Influences of socioeconomic status, with socioeconomic position: baseline data from a randomised social network, and competence on subjective well-being in later life: controlled trial’, Journal of Epidemiology and Community Health, 58, a meta-analysis’, Psychology and Ageing, 15 (2), pp.187-224, doi: pp.667-3 10.1037//0882-7974.15.2.187 Casey, B. and A. Yamada (2002) Getting Older, Getting Poorer? A study Statistics New Zealand (2006) Demographic Trends 2005, Wellington: of the earnings, pensions, assets and living arrangements of older Statistics New Zealand people in nine countries, OECD Labour market and social policy Statistics New Zealand (2007) National Population Projections: 2006 occasional paper 60, Paris: OECD (base)–2061, Wellington: Statistics New Zealand Commission for Financial Literacy and Retirement Income (2013) Statistics New Zealand (2013a) Census QuickStats about national Focusing on the Future: report to Government, Wellington: highlights: age and sex, http://www.stats.govt.nz/Census/2013- Commission for Financial Literacy and Retirement Income census/profile-and-summary-reports/quickstats-about-national- Department of the Prime Minister and Cabinet (2008) Families in highlights/age-and-sex.aspx Australia 2008, Canberra: Department of the Prime Minister and Statistics New Zealand (2013b) QuickStats about housing, http://www. Cabinet stats.govt.nz/Census/2013-census/profile-and-summary-reports/ Depp, C.A. and D.V. Jeste (2006) ‘Definitions and predictors of quickstats-about-housing.aspx successful aging: a comprehensive review of larger quantitative Statistics New Zealand (2014) New Zealand period life tables: 2010–12, studies’, American Journal of Geriatric Psychiatry, 14, pp.6-20 http://www.stats.govt.nz/browse_for_stats/health/life_expectancy/nz- Gabriel, Z. and A. Bowling (2004) ‘Quality of life from the perspectives of period-life-tables-info-releases.aspx older people’, Ageing and Society, 24 (5), pp.675-91, doi:10.1017/ Stroombergen, A. (2013) The Sustainability of New Zealand S0144686X03001582 Superannuation: getting the starting point right, Wellington: Headley, B. and M. Wooden (2004) ‘The effects of wealth and income Infometrics Ltd for Financial Services Council on subjective well-being and ill-being’, Economic Record, 80 (special Waldegrave, C. and M. Cameron (2009) ‘Income, assets, living standards issue, September), pp.S24-33 and housing’, in P. Koopman-Boyden and C. Waldegrave (eds), Housing Shareholders Advisory Group (2010) Home and Housed: a Enhancing Well-being in an Ageing Society, Lower Hutt: Population vision for social housing in New Zealand, Wellington: Housing Studies Centre, University of Waikato, and Family Centre Social Shareholders Advisory Group Research Unit Hsu, H-C. (2010) ‘Trajectory of life satisfaction and its relationship with Waldegrave, C., R. Stephens and P. King (2003) ‘Assessing the progress subjective economic status and successful aging’, Social Indices on poverty reduction’, Social Policy Journal of New Zealand, 20 Research, 99, pp.455-68, doi 10.1007/s11205-010-9593-8 (June) Kohli, M., H. Künemund and T. Zähle (2005) ‘Housing and living Wilhelmson, K., C. Andersson, M. Waern and P. Allebeck (2005) ‘Elderly arrangements’, in A. Borsch-Supan et al., Health, Ageing and people’s perspectives on quality of life’, Ageing and Society, 25, Retirement in Europe: first results from SHARE, Mannheim: pp.585-600 Mannheim Research Institute for the Economics of Aging Netuveli, G., R.D. Wiggins, Z. Hildon, S.M. Montgomery and D. Blane (2006) ‘Quality of life at older ages: evidence from

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 65 Elizabeth Eppel

Improving New Zealand Water Governance challenges and recommendations

Water permeates ecosystems, jurisdictions, and communities, linking complex and emergent social, cultural, technological and economic

systems. – Russell, Frame and Lennox (2011), Old Problems, New Solutions

Our lives and our livelihoods depend on fresh water. Our and badly polluted some of cities and the appeal of our countryside to New Zealanders our water resources. Such and tourists alike are based on plentiful supplies of fresh problems point to significant water. The overwhelming majority of New Zealand’s exports weaknesses in the governance – not least agricultural and horticultural – require water, of fresh water in this country. and in large quantities. Indeed, in many respects water is This article explores these New Zealand’s largest export. Yet the management of our governance issues through fresh water has not been ideal. We have over-allocated, a complex adaptive systems lens and outlines some Elizabeth Eppel is a Senior Research Fellow in the School of Government, Victoria University of Wellington with a research interest in complex policy processes and collaborative governance. possible solutions.

Page 66 – Policy Quarterly – Volume 10, Issue 3 – August 2014 What is water governance? Figure 1: New Zealand’s water governance regime Water governance refers to the processes Water through which government and non- Governance PCE Action Areas Ministry of New New Zealand Health Department of Zealand Environment government actors and citizens interact Ministry for the Parliament Internal Affairs Environment Court repeatedly to produce a pattern of rules, Ministry for practices and behaviours through which Primary Department of OAG Industries Conservation water is managed and outcomes are

achieved (Russell, Frame and Lennox, National National Policy 2011). Good governance and effective Specific National Resource Specific Objectives Statement Management Act Standards Standards Freshwater governance are not the same thing: on Limits Framework on Limits Environmental good governance has its focus on doing Protection Agency particular things; effective governance has its focus on achieving the best outcomes Re giona l Regional Council District or Unitary Council for all over time (Perry, 2013). Effective and Councils sustainable water governance needs to be Regional Plan purposeful and adaptive (Foerster, 2011) if Towns, Cities and Local it is to achieve the outcome of sustainable Consents specific water citizens

L oca l Allocations catchments within practices for use and conservation of Local each Regional users Council Boundary fresh water for subsequent generations. and Limits It recognises that there are biophysical limits beyond which the natural systems cannot be self-sustaining. We seem to types, each with a specific or general legal of farming activities on the demand for treat these limits as trivial matters, though mandate conveying responsibility for fresh water and the negative effects on there is not a ready replacement for our some aspect of the regulatory regime human health and livelihoods through natural freshwater systems. Without fresh applying to the governance of water. increased nutrient run-off into our rivers water life cannot exist – like a rubber The New Zealand Parliament and and lakes (Parliamentary Commissioner band stretched till it breaks and is never government agencies such as the Ministry for the Environment, 2013). again able to function as it did before, no for the Environment, Department of In specific regional geographic matter how we try to mend it. Conservation, Ministry for Primary contexts, the prime responsibility for The following sections identify the Industries, Ministry of Health and achieving the water governance outcomes components of New Zealand’s water Department of Internal Affairs, set specified by the RMA rests with regional governance system and how well they are the policy frameworks within which councils. The auditor-general has called currently functioning. Using a complex governance of fresh water occurs. While councils to account for their efficiency system lens (Eppel, 2012, 2014), I note Parliament has established the Resource and effectiveness in executing this role areas which need more attention from Management Act 1991 (RMA) as the over the life of the RMA (Controller and policy makers, implementers and all New principal legislation for water governance, Auditor-General, 2005, 2011): an example Zealanders interested in the quality of there are also requirements in other is how they monitor the effectiveness our water now and for generations ahead. legislation.1 of their policies. These elected councils Our current rate of policy progress is too The Environmental Protection must work with a variety of individual slow to keep up with the rate of change in Authority adjudicates on the application and organisational actors (users, those water quality, which presents an effective of the policy frameworks for national affected by use and regulators at various water governance challenge. This article projects, and the Environment Court levels) to achieve a water governance points to areas where accelerated efforts provides a forum in which decisions made regime which is consistent with the roles, are needed. might be challenged. The Parliamentary purposes and limits specified by the act. Commissioner for the Environment and The Environmental Protection Authority Components of the complex water the Office of the Auditor-General may fulfils this consenting role in respect governance system investigate how well these arrangements of what the minister deems ‘nationally The institutional context in which water are working and how effective (or significant projects’. The RMA therefore governance takes place in New Zealand not) other agencies are in carrying out shapes and constrains the interactions is complicated, having a number of their responsibilities under the act, and between the actors in the different action arenas, which I describe below and advise the Parliament. The former has arenas. Matters of contention between provisionally summarise in Figure 1. explained the science which affects the the various actors become the points on Multi-layered and complex institutional quality of our fresh water (Parliamentary which the Environment Court may be arenas for decision-making Commissioner for the Environment, asked to adjudicate, although clearly not At the national level there are a number 2012) and drawn attention to the all who are dissatisfied with decisions of organisational entities of diverse implications of continuing intensification have deep enough pockets to pursue this

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 67 Improving New Zealand Water Governance: challenges and recommendations route. There is also a problem with access an integral part of this constraining and are consistently encountered in reviews to expert technical advice because often enabling environment. Each actor takes of academic literature: this relatively scarce resource is tied to into account the institutional constraints 1. They adopt a systemic perspective: the action of the council or the better- and the actions of others, and how they will that is, the governance regime resourced advocates for a particular position themselves in the consumption links ecological, social, economic, decision.2 of water. technical, legal, cultural and other Water governance also has a Mäori This means that we need to aspects of the local or regional water dimension, deriving from the articles of understand the consequences of a system to assist understanding of the the Treaty of Waitangi which guaranteed complex adaptive system4 at work and ubiquity and complexity of water the Mäori chiefs ‘full exclusive and the implications for how government resource challenges. undisturbed possession of their Lands agencies (and other actors) might work 2. They focus on the social actors: in and Estates Forests Fisheries and other in such a system (Room, 2011). In this order to understand the governance properties which they may collectively or conceptualisation, the human actors system it is necessary to know who individually possess so long as it is their are part of a series of nested systems is causing or contributing to the wish and desire to retain the same in their that make up a governance regime. In a problems and who is willing or possession’.3 As well as the duty to protect complex adaptive system the individual ought to be doing what to mitigate and consult with Mäori, the Crown actors are constantly responding to each and solve problems. has agreed as part of the settlement of other and their institutional settings in 3. They encourage a transparent and accessible discourse on values and goals: the governance regime adopts Internationally, people studying water governance processes to specify, reveal and negotiate tangible needs, preferences agree that an effective water governance regime and visions among regional and local stakeholders and discover needs to be sustainable. their implications for water systems governance. 4. They adopt a comprehensive historical grievances that some tribes not completely predictable sequences of perspective: the governance regime will have a more active guardianship role action, reaction and counteraction (see, aims to account for social-ecological for rivers in their rohe (tribal area). For for example, Innes and Booher, 2010). integrity, sufficient livelihoods, social example, the Waikato–Tainui tribes now justice, intergenerational equity, and have a co-management role in respect of Adaptive and sustainable any other factors which might affect the Waikato River. Even where there is New Zealand’s fresh water is largely a the sustainability of the governance no specific agreement as in this instance, free good from which some can obtain regime over time. (Wiek and Larson, there is more general acceptance by significant private benefits without bearing 2012) government agencies that Mäori tribal the costs of their use, or the risks to the Therefore, to assess the sustainability authorities and hapü will play a more sustainability of freshwater systems for the of a water governance regime a active role in the governance of traditional use of others in the future. Internationally, comprehensive, dynamic picture is water resources, and examples of this can people studying water governance agree needed, built up from the above core be seen in various local water governance that an effective water governance regime information elements. arrangements. needs to be sustainable. That means it must First, the boundaries of the social- be able to operate within environmental ecological and hydrologic systems to be Interacting, interdependent complex systems limits and deliver an environmentally governed must be mapped in ways that do An institutional analysis alone is self-sustaining result trajectory over time not lose sight of ‘the interactions between inadequate for understanding the (Rau and Edmondson, 2013). political units of decision making, where complex interactions between individual Given the complex interactions power and authority to implement actors and the institutional environment between people and natural systems, societal actions and policies typically that constrains them (Room, 2011). In the water governance also needs to be resides, and the biophysical interfaces of multi-actor decision-making arenas New adaptive. This means that the governance hydro-ecological resources and processes’ Zealand has created, the rational actions process, in order to be able to produce an (ibid., p.3156). of individual actors (users, those affected environmentally sustainable result over Second, there needs to be a focus on by use and regulators) are constrained by time, must be able to adjust in response people’s actions and activities related the institutional rules and processes which to changes in the other nested systems to water resources: where water comes shape the interactions between them (economic or social) affecting the water from; how supplies are accessed and (Ostrom, 2005; Room, 2011). Political governance system. Four characteristics managed; where water goes – i.e. how and economic power in this analysis are of sustainable water governance regimes it is distributed to users, whether by

Page 68 – Policy Quarterly – Volume 10, Issue 3 – August 2014 engineered or natural means, and how on hydrological systems (principle 7: the Land and Water Forum (2010, 2012a, people use and conserve water for various precaution, mitigation and adaptability), 2012b) has pointed to the need to improve purposes, ‘including human, economic, but do not emphasise these sufficiently in the effectiveness of the water governance and ecological needs and wants’ (ibid., the light of emerging knowledge, such as process to limit the decline in water p.3157); outflows – i.e. what happens to the latest reports of the Intergovernmental quality. Modelling shows that the rate of water after it has been used; and cross- Panel on Climate Change on mitigation nutrient addition from land use run-off, cutting activities that affect the former and adaptation (see, for example, principally from dairy farming but from domains, such as planning, monitoring, Hollis, 2014). The application of such all forms of land use change, is increasing deliberation and advocacy. The result of a set of principles in practice would be and can be expected to continue to this activity would be a comprehensive dependent upon open access to a very do so (Parliamentary Commissioner water governance information system. rich information system, containing not for the Environment, 2013) – in some Third, a dynamic systems view of just data about a few physical parameters regions dramatically so. For instance, the interactions between the two sets but also relevant biological ecosystem, the nitrogen load in Canterbury, which of systems described above needs to economic and social data, and visual has the highest increase in land use for be built. This would map the dynamic tools for displaying that information in dairying, is predicted to have increased by exchanges between the biophysical ways that might be understood easily by 50% between 1996 and 2020, resulting in and human systems. It would include a large segment of the population. It also increasing toxicity of many aquifers, rivers the interactions between actors and assumes that monitoring is active and and streams in lowland areas. the rules that influence them, and the interfaces between these systems and any factors beyond the boundaries which Dramatic changes in land use in some regions and influence the regional water system or its governance regime. Political power increasing population have brought about some influences the regime through the rules that are set, although not always in the rapid declines in fresh water quality in ways intended. This dynamic model New Zealand. represents the governance regime, and repeated iterations of interaction between the systems described are the mechanisms continual and that the economic, social, Access to information about the of the governance regime. regulatory and political systems are state of water quality and changes in The information generated by responsive, so that any lags in the system quality is improving. We have seen such a model over time, as well as do not reward those abusing the consents regional councils collaborate with each driving the day-to-day process of water granted under the regime. other, with research institutions and the management, might also be used to Ministry for the Environment and invest assess and evaluate the effectiveness of a Water governance in New Zealand now in sophisticated water quality monitoring particular governance regime through the Dramatic changes in land use in some regimes, and make results from these longitudinal picture it forms. Analysis of regions and increasing population have monitoring sites available to the public.5 a water governance regime in operation brought about some rapid declines in Recent policy progress, enabled in part by in a particular context along the lines fresh water quality in New Zealand. a more constructive dialogue among élite outlined above would be accompanied by Voluntary agreements such as the Dairy policy stakeholders6 through participation judgement about the sustainability of the and Clean Streams Accord (2003) and in the Land and Water Forum (see, for regime by all who might have a stake in its its successor, the Sustainable Dairying: example, Eppel, 2013), includes two new effectiveness. I will return to who judges Water Accord (2013), while recognising policy instruments: the National Policy the effectiveness of a water governance some aspects of the problem have been Statement for Fresh Water (2011), and regime in the next section. ineffective in bringing about change. They a requirement for regional councils to Wiek and Larson (2012) suggest a advocated voluntary mitigation strategies set water quality standards to maintain set of seven principles as a starting point incumbent on individual farmers, which or improve the quality of the freshwater for judging a governance regime for clearly have not worked because on the bodies in their area. Both these steps were its sustainability (see Figure 2). Their whole water quality in areas of intensive welcomed by most as long overdue. They principles allow for multiple interests in and increasing dairying has continued to address gaps in the policy framework that water governance (see principles 4 and 5: decline. Expert scrutiny of water quality has been in place since 1991 by giving socio-ecological civility and democratic trends and the operation of current more national guidance to the work of governance, and inter- and intra- governance arrangements undertaken by regional councils. That only three of generational equity) and the changing the Parliamentary Commissioner for the the 16 regional councils reported that risks to sustainability that arise from the Environment (2012, 2013), the Office of they would be able to complete their impacts of the effects of climate change the Auditor-General (2005, 2011) and implementation programme to give effect

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 69 Improving New Zealand Water Governance: challenges and recommendations

Figure 2: Principles for assessment of sustainability (Wiek and Larson, 2012) when these new proposed limits will be Sustainability Principle Key Features Domain of Activities operative is currently unknown. They also 1. Social-ecological a. Maintain minimum flows in surface water Supplies leave a gap in areas where remediation system integrity b. Maintain or enchance the quality of water resources Deliveries might be required. The replacement of c. Ensure aquifers are not over-taxed to points of instability Supplies/Uses the elected Canterbury Regional Council d. Recognize and co-ordinate resource uses and impacts within (ECan) by appointed commissioners in appropriate physical units 2010 because of ‘lack of progress on a 2. Resource efficiency a. Reduce water use or enchance water-use efficiency Uses regional water plan’, and the decision not and maintenance b. Reuse water or recycle wastewater for various uses Uses/Outflows to hold an election in 2013 despite progress c. Eliminate water losses Supplies/Deliveries in the meantime on the Canterbury Water Management Strategy under the d. The groundwater extraction rate should not exceed the Supplies/Uses groundwater regeneration and recharge rate collaborative leadership of the Canterbury 9 3. Livelihood a. All people pursuing livelihood activities have access to sufficient Supplies/Uses Mayoral Forum, demonstrates how Sufficiency and quality and quantity of water politicised water governance has become opportunity b. All people pursuing activities enchancing their psycho-physical Supplies/Uses in some regions, and how difficult it might well-being have access to water be to achieve real results in areas where c. All people pursuing economic activities have access to sufficient Supplies/Uses likely bottom lines have in all likelihood quality and quantity of water already been exceeded. 4. Socio-ecological a. Involve all groups who affect or are affected by water governance Cross-cutting Proposed amendments to the civility and efforts into decision making RMA to permit more collaborative democratic b. Elicit the full array of interests and perspectives through various Cross-cutting and local approaches as envisaged and governance stages of governance recommended by the Land and Water c. Establish collaborative endeavors for water governance All/Cross-cutting Forum have yet to be passed into law. 5. Inter-generational a. Ensure a fair distribution of benefits and costs among all actors All/Cross-cutting This delay highlights one of the major and and stakeholders tensions, between the sustainability of the Intra-generational b. Facilitate stakeholder representation based on demography, Cross-cutting natural biophysical systems and the desire equity geography, and interest for economic development, at the heart c. Ensure representation of future generations (e.g., via guardians All/Cross-cutting of the water governance problem. The who defend their interests) government’s proposal to also include 6. Interconnectivity a. Reduce or eliminate negative impacts on other regions Supplies/Uses/Outflows changes to the principles of the RMA to from local to b. Plan within the watershed or groundwater basin context Supplies/Uses prioritise economic development over regional to global c. Recognize and coordinate between local actors and broader All/Cross-cutting environmental quality led to withdrawal scales scale stakeholders of support from its minor party 7. Precaution a. Anticipate potential water shortages and water quality problems Cross-cutting allies. In March 2014 the government (mitigation) and b. Mitigate potential water shortages and water quality problems All/Cross-cutting introduced an Environmental Reporting adaptability c. Adapt to water shortages and water quality problems All Bill to establish more comprehensive, ‘independent’ environmental reporting to these changes by the end of 2014 speaks objectives. The proposed amendment every three years by Statistics New of how little real progress has been made would also impose a set of national water Zealand and the Ministry for the on the ground under the current regime. quality ‘bottom lines’ which locally-set Environment. The bill was welcomed by The remainder have taken advantage objectives cannot exceed. Two compulsory most parties for its general intent, but of the very long timeline the National national values are proposed: Te Hauora was also criticised for undermining the government allowed under the regulation: o te Wai/the health and mauri of the stated objective of independent reporting for example, Canterbury taking up to 2020 water (ecosystem health) and Te Hauora by making it possible for the government to set limits and publish data on quality. o te Tangata/the health and mauri of the to control through regulation the This step is also a long way short of people (health risks to people boating or matters to be reported on. This much- actually meeting or exceeding a minimum wading). A further eight national values needed legislation, allowing for true quality standard which can maintain the are identified, which might be applied to independence of reporting, will not be natural ecosystems across the country. a particular water unit, such as its natural passed in this term of government. In 2013 the government proposed form and character, food gathering, or an amendment to the National Policy swimming and recreational qualities. This Local water governance experiments Statement for Fresh Water to add a remains a work in progress.8 Some experts While policy on fresh water at the National Objectives Framework which view the quality standards the government national level has at times been stalled would require councils to establish a set proposes as not tough enough to preserve or has been making very slow progress of values and objectives for each ‘fresh fresh water quality against a trend of (Logan, 2013), some very interesting, and water unit’,7 consistent with national intensifying agricultural activity, and potentially informative, innovation in

Page 70 – Policy Quarterly – Volume 10, Issue 3 – August 2014 water governance has been emerging in water recreation and sporting activities, The Canterbury Water Management communities around New Zealand. These and those who would like to reshape the Strategy (CWMS) is a particularly practices amount to ‘experiments’ (Eppel, natural environment to suit a different complex example because of the physical 2014) in the sense that, in each instance, economic purpose, such as more intensive area it covers, the extensive changes being what is happening to bring about water agricultural and horticultural production, made to the natural water system and the governance is a highly contingent set of bring another set of perspectives. Scientists magnitude of the changes in economic interactions between a large number of and technicians with knowledge of how use (Canterbury Mayoral Forum, 2009; interdependent actors particular to the natural systems function and remain self- Russell, Frame and Lennox, 2011; Salmon, specific context. I have described six of sustaining remain an integral part of the 2012; Eppel, 2014). The strategy came these experiments in detail in a Policy mix. The collaborative process is requiring about through the collaborative efforts of Studies working paper (Eppel, 2014). people with these diverse perspectives to a large number of stakeholders and all the The examples I draw from include the learn more about what they each know local body mayors in the region covered Land and Water Forum (Eppel, 2013), and understand about the biophysical, by the regional council, Environment Lake Taupo, the Canterbury Water social and economic systems affecting Canterbury (ECan), who saw that their Management Strategy, Te Waihora/Lake water governance, and to use the process collective and individual interests would Ellesmere, and Horizons Regional Council to generate new understanding and be better served by a common strategy. and the Manawatu River Leaders Accord. workable governance solutions for both As part of the implementation Ecan has They are only five of the more prominent the shorter and longer term. appointed ten zone committees, one for and better documented examples of water governance experimentation going on around the country. The Treaty of Waitangi and settlements made Each experiment varies in the context of its initiation, the actors involved and through the Waitangi Tribunal process have had the approach to water governance which has evolved. These practices are being an effect on the willingness of government and its designed largely from the ground up, various agencies to work with iwi and hapu- in co- or the middle out, rather than the top down, and are sometimes supported management arrangements. by government funding.10 They are drawing on practical and Mäori cultural wisdom of local iwi or hapü and their In all of these experiments the natural, each water unit, overseen by a regional knowledge of specific contexts, as well social and economic systems are constantly zone committee, as a way of introducing as traditional scientific knowledge, and undergoing changes in response to each collaborative learning processes for are using processes that are outside, or other, as well as to systems outside the understanding the complexity of are working around, the planning and current consideration, such as changes in the changes these local systems are consenting parameters of the RMA. They local weather systems producing extreme undergoing and how they might best be involve active collaboration between the weather events, the global climate accommodated by the regional council in actors involved to frame the governance system and the global financial system. its planning and management decisions. problem and design the steps forward to Understanding the dynamics at work Ideally, the collaborative processes bring some agreed improved outcome. needs both hard factual knowledge from the knowledge, values and resources The Treaty of Waitangi and scientific monitoring programmes and of all of the actors involved into play. settlements made through the Waitangi softer social knowledge and values. Most Collaboration done well allows mutual Tribunal process have had an effect on of the areas involved are facing increasing learning (Emerson, Nabatchi and the willingness of government and its economic use of water in agriculture, Balogh, 2011; Gerlak and Heikkila, various agencies to work with iwi and which is altering the natural system, 2011), adaptation and the emergence hapü in co-management arrangements. and also altering societal patterns in the of creative and sustainable solutions to Mäori involvement brings a diverse set water use through changes in lifestyles occur. Currently the recommendations of perspectives into play, which include and pressures for further intensification of these zone committees are advisory traditional spiritual and cultural values of economic activities which make high only, and the regional council must take but also, more recently, following demands on fresh water. In each of these responsibility for the final decisions historical Treaty settlements, values experimental sites there appears to be an within their legal mandate. associated with ownership and economic acceptance that a government body alone While ECan and the CWMS have development. Advocates for economic cannot have sufficient knowledge or made good progress in setting up the development, spanning interests in the resources for the effective governance of zone committees, progress towards real maintenance or enhancement of natural fresh water and that a more participative results in terms of water management is water qualities such as for tourism and process is needed. slow and the success of this strategy to

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 71 Improving New Zealand Water Governance: challenges and recommendations date is therefore difficult to judge. The the country, and particularly in the most More accessible, transparent and picture is further obscured by consents intensive-use areas such as Canterbury comprehensive water quality information granted by ECan prior to the adoption and Southland, is yet to be seen. Effective governance needs continuing of the CWMS and the establishment of In a practical sense these experiments sense-making (Weick, 1995; Weick and the committees still being acted upon. are providing new knowledge about Sutcliffe, 2007) and adaption to changes The most important question ECan alternative approaches to water in all of the systems that make up the and the Mayoral Forum responsible governance which could prove effective in water governance regime. I would argue for CWMS need to address is whether the locations where they occurring. At the that the more open and accessible are the zone processes can move speedily national level we need a deliberate plan the information systems which tell us and effectively enough to keep up with to evaluate these experiments for what how effective the governance process has intensifying agricultural activity and land we might learn about how to do effective been in maintaining or improving water use change in the fastest-changing area water governance systemically in New quality, the more inclusive and therefore of the country, and begin to remediate it Zealand. We need to ensure collection sustainable and effective the governance where necessary. And the country should of and ready access to a rich data picture regime. That is, a common resource demand more assurance on this question of the changes that are occurring and a like water is more likely to be governed sooner rather than later. developmental evaluation methodology effectively when it is also able to be While each of these experiments is (Patton, 2011) to tell us about how monitored by all of us who make up the at a different stage of maturity, it is clear these processes are working and how commons. The accessibility and ease of interpretation of huge amounts of The water governance regime operating today has monitoring data is a necessary precursor to a wider segment of the population being resulted from the repeated interactions between in a position to assess the effectiveness of the governance regime and influence complex human and natural systems over nearly changes in it where necessary. The 200 years since first European settlement ... investment that the regional councils and their collaborators have made in Land, Air, Water Aotearoa (see note 5) is a good first step. Ongoing effort and investment that New Zealand is still learning how to they might be improved. Thus far there is needed to create more data points and do collaborative governance well. Also, is no Ministry for the Environment-led more accessible and visually-informative we are not monitoring the product of research of this breadth. displays of increasingly sophisticated these processes comprehensively at the and complex data. We also need more national level to ensure that they do Towards an effective information about who uses water achieve a trajectory that New Zealanders water governance regime and the effects of that use, and a truly think is desirable in terms of water quality Returning to the distinction made independent Environmental Reporting for both current and future generations. between good governance and effective Act. The Environmental Reporting Bill, if and governance, a further distinction is to when it becomes law, might be too little be made between what must be done Set bottom lines and too late to stimulate the remediation (according to the law or policy) and what The water governance regime operating needed. Research would suggest that ought to be done (for the sustainability today has resulted from the repeated we should focus on both the process of the resource for future generations) interactions between complex human and outcomes and the substantive outcomes (Perry, 2013). In New Zealand (and natural systems during nearly 200 years for the environment, the society and the probably also in other jurisdictions) the since first European settlement, and in parts economy (see, for example, Innes and incentives for governments to adequately of the country there may well be patterns Booher, 2010). Process outcomes are weigh intergenerational trade-offs are that persist from before that time. Most about the capacity and the capability weak. The multiple governmental agencies recently the processes and institutions of the processes to continue to deliver with jurisdictional responsibility also imposed and used by the RMA have simply results. The substantive outcomes are contribute to bounded, and not always built on the processes that preceded them much more incremental and long- consistent, institutional framings of the through the water catchment boards and term in their production and therefore issues and solutions. We need, therefore, their predecessors, and some will not have difficult to detect initially. Whether these to work on how effectively the parts of the changed. Farming and land use practices, experimental practices are able to result in whole work together, because the sum of perceptions of water ‘ownership’ and our hard decisions to bring about long-term the parts, as for all complex systems, is less values concerning fresh water, all of which maintenance, and in some cases needed than the whole. affect how the governance regime works improvements, in water quality across in practice, have created today’s pattern.

Page 72 – Policy Quarterly – Volume 10, Issue 3 – August 2014 If we want to change the trajectory of processes would also change the have perverse incentives should not be the governance regime to get a different repertoire of roles required from regional underestimated.12 outcome we first need to be clear about government actors. As well as planning, what the outcome looks like, and then measurement and monitoring expertise, Be clearer about what an effective water concentrate on how to change some of regional councils will need greater governance regime looks like the patterns (feedback loops) that are facilitative and collaborative leadership New Zealand is familiar with governance supporting that current trajectory. The expertise, all rather more difficult to regimes that are top-down. When it new National Policy Statement and the quantify and measure. Rather than comes to governance of complex systems, proposed National Objectives Framework measure, plan, command and control, power and top-down decision-making and national standards for fresh water are regional councils will also need to be able do not have the direct and predictable small steps in the right direction because to listen, communicate large amounts of outcome that some might expect. This is they set some boundaries and rules to technically-complicated information to a because other actors will adapt the rules guide the decisions made at the local non-technical public, and interpret, reflect as part of their implementation. The level; but the bottom lines need to be high and translate what they hear into coherent institutional capabilities in the current enough for ongoing ecosystem health.11 planning and action that can deliver on system are bounded within traditional, They are also novel in their attempt to expectations over time. and artificially segmented roles. For recognise a plurality of values which Councils will need to be stewards of example ministers influence by structural come into play in decisions about water allocation and use. While the government delays passing the necessary regulation Collaborative processes take time and there is not to give effect to ecosystem-sustainable bottom lines, water quality in some areas, yet a history of successful collaborative governance such as Canterbury and Southland, will in New Zealand, as is more typical of other continue to deteriorate. Also, without adequate monitoring of the application jurisdictions, such as the Scandinavian countries ... of limits and standards by councils, the public of New Zealand will have no way of judging their impact. Therefore, regionals the longer-term trajectory and outcome. and instrumental rule changes. Regional councils should be required to accelerate They will need to be energisers who councils have traditionally been decision- their programmes to set standards and facilitate the marshalling of information; makers responsible for producing long- introduce monitoring and remediation encourage conversations with diverse term plans which are promulgated programmes where needed. stakeholders to understand the larger for consultation before being put into governance pattern and results; and practice. Stakeholders are consulted, and Facilitate more participatory water obtain and shepherd resources (human unresolved objections might end up in the governance processes and material) to monitor progress. Environment Court for further mediation Giving effect to the Land and Water Councils will also need to pay attention or a ruling. Regional council expertise Forum’s recommendations in the way to the micro-changes that might signal in that governance system has been in foreshadowed in the government’s policy changes in the feedback loops which are the information-gathering and synthesis document Fresh Water Reform 2013 and affecting the overall trajectory, and be able tasks involved in planning, consultation Beyond (Ministry for the Environment, to identify tipping points at which small and plan implementation. 2013), to allow a more collaborative process, changes begin to manifest as something A more collaborative, effective seems desirable given the complex systems new or unexpected. This change of role governance regime would require: new which interact to create water governance. is consistent with governing a complex types of knowledge about water users, Rather than the current top-down, system, but that does not make it any less the effects of water use, values, and other council-led process of plan formation and challenging for human capability or for information that regional councils do approval, with disagreements resolved recognising when a governance regime is not currently have nor have the means through the Environment Court, there is working well and when it is not. and capability to generate; innovative, an opportunity to get a different result by One of the options for paying for this participatory processes to enable those bringing new information and currently increase in the capacity and capability with different knowledge and perspectives unrecognised values about a particular of regional councils is to ensure that to share them; capability to facilitate water unit to bear. the risks and benefits of water use collaborative engagement and learning are more fairly shared by those who processes; capability to make large Recognise and resource the need for stand to gain economically. This is not amounts of water quality information changed capacities and capabilities in currently the case; but the difficulties accessible to the public; and capability regional councils of creating pricing schemes that do not to translate the outcome of collaborative Legislation to enable collaborative processes into artifacts (documents,

Policy Quarterly – Volume 10, Issue 3 – August 2014 – Page 73 Improving New Zealand Water Governance: challenges and recommendations process guidance and the like) that trigger approximations or clumsy solutions councils to support these processes. While wide ownership and selective action. The (Verweij and Thompson, 2006), which the plurality of values and perspectives on process has to be effective in preserving might nevertheless be effective. So there fresh water is what makes its governance the quality of fresh water for future must also be ongoing adaptive learning inherently complex and difficult, ignoring generations, in some places undoing the which takes into account changes in the these aspects has not delivered outcomes poor decisions of the current regime. systems, especially those changes which acceptable to many in the population. That may require future decisions that might appear ‘not to fit’ the present We need to accept that the fresh water will be highly unpopular with some who understanding of how things are working. problem demands governance processes may seek political influence to overturn There must also be adaptive capacities built compatible with its complexity. processes and decisions in order to into the creation and execution of plans 1 For example, for drinking water quality in the Health Act maintain the status quo. developed as part of water governance. administered by the Ministry of Health and the district Given the variation in context and The temptation for central government health boards, and requirements in the Conservation Act and the Reserves Act administered by the Department of actors of each water governance site, to intervene in collaborative governance Conservation. 2 This appeared to be the case in the recent Ruataniwha dam centrally-prescribed and controlled processes which, from the outside, may application process. processes are unlikely to lead to effective at first appear messy and inconclusive 3 For a description of the treaty and its articles in English and Mäori see http://www.waitangi-tribunal.govt.nz/treaty/default. governance which is adaptive to changes is strong, but such intervention comes asp. taking place at the local level over time. at the price of lost collaborative capital, 4 Complex adaptive systems consist of many interdependent parts which interact reflexively and nonlinearly over time In the experiments referred to above, a and also the loss of potentially more to create patterns of change or stagnation, depending on whether the interactions between the parts reinforce each wide variety of governance structures innovative, sustainable and lasting other or cancel each other out. and processes have brought about a series solutions. If the default response of 5 Land, Air, Water Aotearoa (LAWA) reports data in a comparative and trend format from water monitoring sites of new framings of water governance, central government, the media and the on rivers throughout New Zealand. It also has a facility for crowd-sourcing information from the public about water which have advanced water outcomes in a public is to compare what they see and quality. See http://www.lawa.org.nz/. positive way beyond the status quo (Lake experience with traditional, linear, top- 6 Representatives of a core of 12 environmental, land and water use and conservation bodies, later expanded to a total Taupo and Te Waihora/Lake Ellesmere, down governance, there is potential for of 58 such organisations with an interest in fresh water for instance). The combination of clearer constant disruption of these processes governance, made up the Land and Water Forum. 7 This unlovely term is used because of the different ways national expectations about the outcomes, and loss of the opportunities for more various regions have drawn boundaries around their natural water catchments and human-adapted freshwater systems. bottom lines, and investment in improved creative governance solutions. For this 8 See postscript. information and monitoring systems and reason alone the current experiments 9 A forum consisting of all the mayors of local bodies in the Canterbury region and Canterbury Regional Council. collaborative capability are effective ways need to be documented and learned 10 Both the Ministry for the Environment and individual regional councils have supported these initiatives in a variety of ways. in which government can influence the from in a developmental way. They are 11 See postscript. outcome from a governance approach, creating new knowledge of how successful 12 The technical and social complexity of designing effective pricing regimes for fresh and waste water generation and use while leaving room for water-unit specific sustainable and adaptive water governance requires further exploration, but is beyond the scope of this history, knowledge and values to play a is done, and we need to systematically article. part. collect data from these experiments and search for the regularities that might lead Postscript Learn from early adopters to new understanding of the mechanisms On 4 July, after this article had been Collaborative processes take time and through which effective governance of submitted, the government gazetted its there is not yet a history of successful water occurs. amendment of the 2011 National Policy collaborative governance in New Zealand, For New Zealanders to develop Statement for Freshwater New Policy. as is more typical of other jurisdictions, confidence in the effectiveness of the The 2014 regulation came into effect on 1 such as the Scandinavian countries (see, country’s water governance regime we all August 2014. Regional councils have until for example, Salmon, 2008). Each site need to see more information about the December 2025 to fully implement the needs to build its collaborative capacity results from what is currently happening. requirements. As with the 2011 National for effective operation and understand We also need unequivocal bottom lines Policy Statement, it can be expected that what enables and blocks its effectiveness. for all aspects of water quality affecting few councils will meet the earlier deadline A downside of collaborative processes is ecosystem sustainability, and shorter of December 2015 and most will take that they may not initially appear as quick implementation timelines. And we need advantage of implementation in stages out or timely as more structured, segmented to have confidence that we are getting the to 2025. The bottom lines the government or closed processes, but the results in the right results. This means: more accessible, has chosen are very low indeed, only longer term are likely to be more resilient transparent and comprehensive data slightly above that at which water is toxic and sustainable if they have been well on water quality and more visually- to all life. In the words adopted in the conducted. A further consequence of the communicative ways of displaying data regulation itself, the standards allow for a dynamism inherent in complex systems trends; more participatory processes that moderate impact on plant and animal life, is that they will continue to change, and engage with a wider range of values and and are only marginally above the level therefore any water governance solutions perspectives on water quality; and new at which rivers and lakes will undergo a reached can only be an ongoing set of capacities and capabilities in the regional regime shift to a persistent degraded state.

Page 74 – Policy Quarterly – Volume 10, Issue 3 – August 2014 The adoption of such low bottom lines consents for the Tukituki Water Scheme Acknowledgements will make it very difficult for regional (which includes the Ruataniwha dam The author would like to thank the councils and communities wanting to proposal) agreed that the scheme could reviewers who provided comment on the adopt higher standards against the will of proceed only if the levels of nutrient working paper on which this article is deep-pocketed commercial interests who run-off were managed so that in-stream based, and especially Professor Jonathan do not face the full social and economic dissolved inorganic nitrogen, as well as Boston for his constructive comments on costs of their water use. on-land leaching rates for nitrogen, which earlier drafts of this article. Interestingly, the announcement of come from mainly from agricultural these changes came just days after the activity, would not rise above the level board appointed to provide the necessary which endangers the water ecosystem.

References Canterbury Mayoral Forum (2009) Canterbury Water Management Logan, H. (2013) ‘Inside the Black Box: the influence of Government Strategy, Environment Canterbury (ECan), http://ecan.govt.nz/get- executive forces on environmental policy effectiveness in New involved/canterburywater/Pages/Default.aspx Zealand’, PhD thesis, Lincoln University Controller and Auditor-General (2005) Horizons and Otago Regional Ministry for the Environment (2013) Freshwater Reform 2013 and Councils: management of freshwater resources, Wellington: Office of Beyond, Wellington: Ministry for the Environment the Auditor-General Ostrom, E. (2005) Understanding Institutional Diversity, Princeton: Controller and Auditor-General (2011) Managing Freshwater Quality: Princeton University Press challenges for regional councils, Wellington: Office of the Auditor- Parliamentary Commissioner for the Environment (2012) Water Quality in General New Zealand: understanding the science, Wellington: Parliamentary Emerson, K., T. Nabatchi and S. Balogh (2011) ‘An integrative framework Commissioner for the Environment, www.pce.parliament.nz for collaborative governance’, Journal of Public Administration Parliamentary Commissioner for the Environment (2013) Water Quality Research and Theory, 22 (1), pp.1-29 in New Zealand: land use and nutrient pollution, Wellington: Eppel, E. (2012) ‘What does it take to make surprises less surprising? Parliamentary Commissioner for the Environment, http://www.pce. 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