IN TOUCH : Ageing population will demand more private/public cooperation

An ageing global population will force governments worldwide to revisit the services they provide and rethink how they will continue to fund public services, according to “Serving the Ageing Citizen”, new global study from Deloitte.
By 2011, the first wave of the Baby Boom generation will reach retirement age meaning the dependency ratio (the ratio of working age people to children and elderly) will rise in most developed countries, demanding new era for governments across the globe. While Japan, Germany and the European Union-14 countries are likely to be hardest hit, New Zealand’s demographics indicate similar patterns towards rising dependency ratio (from 51 percent in 2005 to an estimated 66 percent in 2050).
The study discusses the consequences of shifting demographics forcing governments to rethink how they will finance government services. As the number of elderly increases, there will be smaller percentage of workers to cover the tax burden. Given that tax cuts are more politically acceptable than increases, governments will have to find other ways of generating the revenue they need to fund public services, while simultaneously reducing cost to serve.
Bill Eggers, study author and Deloitte’s global director for research, public sector, was in New Zealand to facilitate some public sector leaders roundtable forums and promote his research.
He says the responses to his findings are likely to appear in four trends becoming more prominent in the next few decades:
1 the need to modernise tax systems to reduce dependence on personal income tax revenues;
2 rise in the average retirement age;
3 increased reliance on user fees; and,
4 growth of public-private partnerships to create new opportunities for partnering and leveraging private dollars for public causes, across number of sectors, and in particular health and transport.
“As the population and workforce ages, governments will have to examine how the growing number of elderly will impact the design and mix of services they offer, the funding sources they rely upon, and the delivery methods they use to deliver services to their people,” says Murray Jack, chief executive of Deloitte New Zealand.
“We have already seen some initiatives to shore up the state retirement ‘war chest’ and to encourage New Zealanders to save, through the NZ Superannuation Fund and KiwiSaver, but it’s less clear how the broader economic growth and sustainability challenges are being addressed,” he says.
The ageing population will also demand changes in the country’s workplaces according to Eggers, who says strong biases remain in some businesses against older workers. While second careers are becoming more common, workplaces need to expand their thinking and adaptability towards flexibility and part-time work.
“Business are going to have to be more accommodating to that. There needs to be change from traditional management roles, for example perhaps move from one full-time 35-year-old manager to two 67-year-olds working part-time,” Eggers says.
“This is the first time we have seen four generations in the workplace at one time and that will demand fundamentally different management role.
“Businesses that do this the best are going to be the ones that recognise that Generation Y needs lot of attention, mentoring, to work in teams and to have constant feedback,” Eggers says.
Baby boomers can provide this, and in return Gen Y can help older workers embrace technology, he adds.
Biological changes as people age, such as eyesight, hearing and mobility issues, also need to be considered and acted upon for successfully integrated workplace, says Eggers.
Addressing potential fears that younger workers may find it harder to progress and attract opportunity, Eggers says there is global talent crunch meaning they will always be in demand.
He has visited New Zealand several times over the past 10 years and notes with some amazement that every single meeting he attends, has people present who have had their full careers in the private sector and that New Zealand has done good job of making the environment friendly to them.
Eggers says governments have traditionally played vanguard role and need to take some lessons from the private sector.
“Government needs to take on some of the business practices from the private sector and implement them, for example segmentation and different channels of delivery.”
Jack agrees saying for New Zealand, getting the right mix of immigration, labour and education policies will go some way to providing relief to the ‘top line’.
“However the higher burden from rising costs in the health, welfare and justice systems as result of an ageing and longer living population means that much more thinking and collaboration, within government and with the private sector, will be needed.
•www.deloitte.com