The " Superannuation " Enigma !

Before the second world war the average Australian reaching retirement age expected to draw the old age pension.   He or she also expected to die within a very few years of becoming a " pensioner " and as our life span became extended economists warned that the numbers drawing the aged pension were becoming unsustainable.

The government of that day sought to fix the problem by introducing compulsory superannuation for all.   It required every employer to contribute to their employees retirement fund and there is no doubt that this imposition was at the expense of wage growth at that time.   At present every employer is required to contribute 9.5% of their employees wages into superannuation.

Both the major political parties have plans to increase that employer contribution to 12 % and this is timed to become fully functional in 2025-26.  The reasoning is two-fold.   Most Australians now retire without enough money to last for the ever extending years of their remaining lives, and the government needs to reduce the numbers drawing the old age pension.

At present, we are experiencing a wage hiatus.  Inflation is low but wage growth has fallen behind despite a growing shortage of skilled labour.  The reduction of penalty rates has actually reduced the take home pay of many casual workers and the " gig " economy has displaced many full time jobs with part time employment with fewer hours.

When compulsory superannuation was introduced there was the expectation that employees would also contribute to their retirement nest egg, but this has not fully eventuated.  For a vast section of the workforce the amount available at retirement will consist solely of their employers contribution.   This increase to 12% will probably have very different outcomes across the broad employment spectrum.

The big and very profitable segment of industry will probably take it in their stride but the effects will be more noticeable with small business.   The move to internet shopping and the problems with franchise administration has drastically changed the throughput of much suburban business and this cost increase will be unwelcome. In many instances, employees have been replaced by family members to keep costs down and often the business format has been changed to a self serve operation. The change to giant hardware complexes has closed many suburban hardware stores and it is noticeable that the ranks of newsagents is ever thinning.   The sight of empty shops in shopping centres is increasing.

There seems little doubt that this superannuation increase will be seen as increased wage commitment and that will dampen any enthusiasm for wage increases by employers.  It may also increase the move away from full time employment to the use of casuals on shorter hours.   What seems to have been forgotten is the idea that accumulating retirement money was supposed to be a joint venture between the employer and the employee.