Age Pensions and wage suppression: What's going on?

Introduction:

Coming up, September 20, age pensioners will receive an increase in their AP equal to the CPI, that is 6.1%. About 2.6 million people receive the AP, 62% of 65’s and over. About 39% of 65s and over receive the full AP and 24% are on the part AP. Government pretends that this is their decision and more than any before, but it still means that many pensioners are living in extreme financial hardship, and here is why …

This is the first in a series that explains how the age pension increases are calculated, why many live in financial hardship, and why more, especially single pensioners, are at the poverty line.

Here is one snapshot of what is happening to the pension relative to the poverty line. The Maximum basic rate (orange line) is the most relevant measure.

 

How the new pension rate is worked out each 6 months

 

The AP is adjusted on March 20 and September 20 each year. The 2 relevant measures are:

· The CPI (the well-known cost of living index,) and

· The PBCLI (Pension Beneficiary Cost of Living Index), benchmarked against Male Total Average Weekly Earnings (MTAWE).

 

Services Australia (SA), a Commonwealth Government department manages the process as required by law.

· First, the ABS provide the data: the CPI, the PBLCI, and the MTAWE.

· Second, whichever is the highest – the CPI or the PBLCI – will be used in the first instance to set any increase.

However, if the wage increase is higher than the cost-of-living indexes, the pension must be brought up as follows:

· For combined couples – 41.76% of MTAWE, and

· For Singles – 27.7% of MTAWE.

The new pension rate is then announced.

 

In September 2020, at the height of the pandemic, falls in the CPI and the PBLCI of about 1.9% meant there was no increase in the pension for September 2020. As required, the rate was not reduced, but remained the same. MTAWE increased by 2.6%, but this increase was not provided to pensioners.

Instead, pensioners were given two one off $750 Economic Support Payments during 2020 as part of the Government’s COVID 19 response packages - less than $3 per week.

 

The Age Pension – Wages Connection

As the pension benchmark, MTWAE shows wages for all workers, including part time and casualized workers (willing and forced), and junior rates. The more workers who are on lower and more fragile rates, the more the downward trend will be, and that means the pension benchmark will be lower. Since 2009 (the start of the current system) MTAWE has been falling relative to Male Full Time Adult Ordinary Time Earnings. For pensioners the unions’ struggles to lift wages and create secure jobs is entirely relevant to their living standards.

 

The current Age Pension Rates – from September 20th, 2022

 

 

Per fortnight

Single

Couple each

Couple combined

Maximum basic rate

$936.80

$706.20

$1412.40

Maximum Pension Supplement

$75.60

$57.00

$114.00

Energy Supplement

$14.10

$10.60

$21.20

Total

$1026.50

$773.80

$1547.60

 

Conclusion

In March 2021

· The single pension (plus Pension and Energy Supplements) is about $10pw below the poverty line.

· For couples it is about $2 below.

· Pensioners who rent are more likely to be in poverty.

 

MTAWE benchmark is to ensure “pensioners maintain a certain standard of living, relative to the rest of the population.1

We suggest the system is not working or, that a general fall in the standard of living for waged workers is now impacting on age pensioners.

 

Our next steps

· An on-line seminar with pensioners and their organisations who wish to discuss these issues.

· To clarify our demands for a better deal for pensioners in time for the May 2023 federal budget.

· To meet with senior ACTU and/or key union officials to discuss the impact of wages suppression and insecure work on the age pension.

· To build support for our general aim: restore and maintain the value of the age pension comfortably above the poverty line.

 

NO PENSIONER LEFT BEHIND!

 

PLEASE SHARE THIS WITH OTHER AGE PENSIONERS THAT YOU KNOW.

Contact: Living Incomes for Everyone – email [email protected] / Facebook https://www.facebook.com/LifeAustralia Fair Go for Pensioners: email [email protected]

 

1 See https://www.haveagonews.com.au/finance/september-brought-changes-to-pensions-heres-what-you-need-to-know/

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