6 Conclusion
This paper has found that population ageing and expected changes in labour force participation affect mainly the composition of the income distribution and the age-incidence of tax and spending. It is not likely to affect income inequality, however measured. People aged 65 and over will represent a larger proportion of the total population and receive a higher share of total welfare expenditure in the form of NZS. However if they continue to earn low market incomes relative to the core working-age population, they will be a larger proportion of lower-income deciles. As a result, NZS will constitute a higher proportion of total transfer payments received by lower income households.
The incidence of net tax and government spending across age groups is expected to be more skewed towards older age groups as a result of changes in the demographic profile and labour force participation rates.
These findings are subject to several assumptions and caveats. Income inequality and poverty are complex phenomena determined by a range of factors. This study isolates and analyses the impact of only two of many such factors - population ageing and labour market participation. It does not take into account the many social, economic and technological changes that may occur in New Zealand over the next 50 years. There is of course considerable uncertainty regarding these changes. The previous 50 years have witnessed significant changes in the ethnic composition of the population, fertility and mortality rates, the structure of families, education, the demand for and supply of different types of skill, industrial structure and the economic environment. Nevertheless, the focus on anticipated changes in age structure and labour force participation is warranted by the considerable attention paid to these factors in current debates and the fact that there is relatively more confidence about their nature.
