A Practical Approach to Well-being Based Policy Development: What Do New Zealanders Want from Their Retirement Income Policies? (WP 15/14)

Abstract

This paper investigates the practicality of using a sophisticated multi-criteria analysis technique to estimate the preferences of a representative sample of the public to inform policy advice. Our application concerns retirement income policy and we use a multi-criteria decision-making survey to (i) investigate the relative importance of seven aspects of retirement income policies to a sample of 1,066 New Zealanders, (ii) document the diversity of policy preferences in a statistically rigorous manner, and (iii) evaluate the way people rank three different retirement income policies from an individual well-being perspective. The results of the paper suggest that multi-criteria surveys as a tool have considerable potential to help policymakers develop and identify policies that are aligned with the way people want to live. In terms of retirement income policies, we find that (i) there is widespread opposition to means-testing, (ii) a majority of respondents would choose an increase in current taxes if this could prevent even larger tax increases on future generations, and (iii) there are strongly divergent preferences over the appropriate eligibility age for New Zealand Superannuation. Overall, a policy combination that raises the age of eligibility for New Zealand Superannuation and reduces future tax increases is opposed by many and preferred by few. However, a policy that more aggressively prefunds New Zealand Superannuation by immediately raising taxes is supported by a majority of people of all ages and income groups.

Acknowledgements

This project was done in conjunction with, and with the financial support from, the Commission for Financial Capability, We would like to thank Diane Maxwell, Malcolm Menzies, Richard Thompson, Kathryn Maloney and Tania Werder for their advice, encouragement and support while the project was undertaken. Several staff at the New Zealand Treasury assisted in the project, and we would particularly like to thank Girol Karacaoglu for his enthusiastic encouragement and support from the beginning, to Gabriel Makhlouf for his support for a new approach to developing public policy, and to Chris Ball, Matthew Bell, Deborah Cuzens, Margaret Galt, Bryan McDaniel, and Paul Rodway. We are indebted for the assistance provided by the staff of 1000Minds, Paul Hansen and Franz Ombler, throughout the project, whether for advice on the best form of the survey questions, for expert software services (including a redesign of some aspects of their software to meet our needs), and for comments on the paper. We also wish to thank the staff of Colmar Brunton, particularly Leilani Liew, for their help in fine-tuning and implementing the questionnaire. We are grateful for the time the members of focus groups in Dunedin, Wellington, and Auckland spent with us discussing their views, including Atene Andrews and the Hikoikoi Kaumātua group in Petone. Lastly, we wish to thank seminar participants and discussants at the University of Otago, the University of Auckland, the New Zealand Association of Economists conference, and the Western International Economics Conference, with particular thanks to Arthur Grimes from Motu. We also wish to thank our reviewers, Norman Gemmell, Trinh Le, Nicola Kirkup and Matt Benge for their helpful comments and suggestions, as well as our editor, David Law. Any errors are the responsibility of the authors and not the reviewers.

Disclaimer

The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the author(s). They do not necessarily reflect the views of the New Zealand Treasury or the New Zealand Government. The New Zealand Treasury and the New Zealand Government take no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but with a view to inform and stimulate wider debate.