New analysis by SGS Partner Terry Rawnsley shows the average Australian woman can expect to retire at age 64.3 with women working in Australia’s more populated cities retiring earlier than their counterparts across the country.
“Overall, women in Australia are staying in the workforce longer, and women in Sydney, Melbourne and Brisbane retire sooner than their counterparts in Perth, Adelaide, Hobart and Canberra. Internationally, Australian women are working longer than women in the European Union but retiring earlier than women in New Zealand, Japan and Korea,” said Mr Rawnsley.
“Current trends also suggest the age of retirement of both men and women in Australia will converge in the next five years,” he said.
Women in Australia are working longer; women-dominated industries on the rise
To measure retirement, we adopted the same approach as measuring life expectancy. That is, for a person aged 45 today, at what age are they expected to retire?
The age of retirement estimate for women in Australia clearly shows the impact of increasing labour force participation rates of younger cohorts of women. The expected age of women withdrawing from the market was below 60 years until 1990 when the age of retirement age began to rise rapidly to reach 64.3 years in 2018.
The increasing age of retirement reflects an abundance of jobs in female-dominated industries in recent years and a generally stronger labour market, which has encouraged ongoing participation among women, and the decline in many male-dominated industries explains Mr Rawnsley.
“Employment in male-dominated industries, such as mining and manufacturing, is stagnating. Which means the ability to remain in employment in these industries is a challenge for older workers. This has resulted in a small decline in the age of retirement for men since 2014," said Mr Rawnsley.
"On the flip side, the increasing age of retirement for women is driven by changing the behaviour of younger cohorts and an abundance of jobs in female-dominated industries, in particular, health care and social assistance,” he said.
FIGURE 1: EXPECTED AGE OF RETIREMENT FOR WOMEN AND MEN
Australian city comparison: Women working in Australia’s more populated cities retire earlier
“When we compare Australian cities, we see that women working in Australia’s more populated cities of Sydney, Melbourne and Brisbane retire earlier than their counterparts in Perth, Hobart, Adelaide and Canberra,” said Mr Rawnsley.
“This may be driven by the relative cost of living in these larger cities which encourage older people to shift out of the city as they age to a lower cost region,” he said.
Figure 2 shows the expected age of retirement for women in capital cities in 2006, 2011 and 2016.
FIGURE 2: EXPECTED AGE OF RETIREMENT FOR WOMEN IN CAPITAL CITIES
International comparison: Women in Australia retire later than women in the EU but earlier than New Zealand, Japan and Korea.
“Women in Australia work a few years longer than women in the European Union. But on the flip side, they retire between five to nine years earlier than women in Japan and Korea. Women in New Zealand work nearly three years longer than women in Australia,” said Mr Rawnsley.
"There has been a worldwide trend towards increased labour participation over the past 20 years driven by increased educational attainment among woman and changing expectations around traditional gender roles," he said.
Table 1 shows the age of retirement of men and women across selected countries in 1997 and 2017.
TABLE 1: AGE OF RETIREMENT, SELECTED COUNTRIES
Australia’s evolving labour force impacts the economy and society
Traditionally, men have tended to retire at an older age than women. However, Figure 3 shows that over the last decade, the gap between the ages men and women retire narrowed, from 1.7 years in 2008 to 0.9 years.
“The increasing age of retirement of women is driven by the impact of increasing labour force participation rates of younger cohorts of women and is a result of social changes around female participation and increasing levels of educational attainment,” said Mr Rawnsley.
FIGURE 3: AUSTRALIAN LABOUR FORCE PARTICIPATION RATES
Overall, the changes in the structure of the economy will continue to influence the age of retirement. The men and women of the baby boom cohort are beginning to retire from the labour force. Longer life expectancy and increased length of retirement mean that their withdrawal from the employment market will have significant repercussions for the economy and more broadly, society. The role of superannuation and the different behaviour between men and women also plays a role.
"On average men can expect to retire with average superannuation savings of almost $100,000 more than women. As a result, Australian women may be working longer in order to supplement lower superannuation savings," said Mr Rawnsley.
Footnote: How we measured retirement
We often think of retirement as the event when someone leaves their job and withdraws from the labour force with no intention of returning. However, a person who ‘retires’ from a full-time job may continue to work part-time or may withdraw temporarily from the labour force and return to employment in the future. This lack of finality in work to retirement transition creates difficulties in defining and measuring the age of retirement.
There are several ways to measure retirement and many alternative data sources. Below are results for Australian in 2011 and 2016, which are based on SGS results from using the Labour Force Survey and Census data and an estimate from the OECD based on the Labour Force Survey but using a five-year moving average approach.