There is no easy way to extend working lives

The government estimates that abolishing the default retirement age (DRA) will produce only 6,000 additional workers aged 65 or over in 2011. At the end of 2010, 870,000 people aged 65 or over were employed in the UK (2 in 3 of which work part-time). This number has risen by more than 50% in the past ten years (despite the introduction of the DRA in 2006); the 2011 rise attributed to the DRA represents an increase of less than 0.7%. The DRA – the age at which employers are legally permitted to ‘retire’ their staff – had to be reformed, because of mounting legal pressure on the ground of discrimination, but also to facilitate the increasing state pension age (SPA). But the government should be under no illusions that abolishing the DRA, or indeed the SPA, will lead to significantly more people staying in work for longer.

The UK’s average retirement age fell steadily throughout the postwar era until the mid-1990s, when it began to rise, currently estimated at around to 64.5 for men (which is below male SPA) and 62.4 for women (which is above female SPA). Given the difficulty of pinpointing labour market withdrawals, however, this account is not undisputed. Sepideh Arkani and Orla Gough, for example, argue that average retirement age rose sharply in the early-1990s, but has since fallen back slightly. At the macro-level, the long fall has been explained with reference to two major factors. First, the pull: the growth of generous and guaranteed defined benefit (DB) occupational schemes (‘final salary’ schemes), particularly in the public sector, meant many people were able to retire early without adverse financial consequences. And second, the push: economic change, chiefly the decline of manufacturing, increasingly led to de facto early retirement for workers made redundant in later life.

At the micro-level, however, the picture becomes far muddier. The main reason individuals cite for early retirement is ill-health. Job quality is also a major factor for many people. It is clear that financial incentives play a part. It seems that unless ill-health and labour market conditions intervene, lower-skilled workers with less generous pensions coverage will work for longer due to financial compulsion. However, it is not the case that more affluent workers retire early. Morten Blekesaune et al found that employees with high professional standing were likely to work for longer, perhaps due to the status and satisfaction derived from their work. As such, a number of current socio-economic trends are likely to impact on retirement decisions. The decline of DB pensions in favour of defined contribution (or ‘money purchase’) schemes alter the financial incentive structure regarding retirement, but also tend to much less generous. An ageing society has also created a large growth in care needs among the ‘oldest old’: caring responsibilities greatly problematise individuals’ capacity to work in later life.

It is clear that neither the SPA nor the DRA has a determining impact on retirement. If the government is to succeed in extending working lives and increasing SPA further without creating inequitable outcomes, it needs to place more emphasis on preventative healthcare, job quality, support for people with care responsibilities, and the creation of transferable skills among the older workforce. Enabling ‘gradual retirement’ may be the key: as the DRA is abolished, there needs to be more encouragement for employers to offer downshifting options for their staff. Furthermore, people should be able to draw down their pension entitlements in more flexible ways. While this option is available in many final salary schemes – and John Hutton recommends it is further entrenched within public sector pensions – it remains wholly absent within the provision of state pensions.

This post was originally published on the ILC-UK blog

Ed Miliband is already winning the battle of ideas

A guest post by Toby Bakare

Because it was his brother who he defeated, it went unnoticed that Ed Miliband had actually won the intellectual battle to be elected leader of the Labour Party. Whilst David Miliband was defending the record of 13 years in government, Ed had deconstructed the problem of why the party had lost and was far happier to abandon the past than his elder brother was.

The Labour party simply failed to energise a core base of voters, white, working class and urban. Events such as the MP’s expenses scandal and bigotgate were only symptoms of this underlying cause. To get these voters back is where the party needs to start in the road to re-election. Ed Miliband won the battle of ideas in the leadership contest and now must do the same against the current government.

Cameron has, over the past few weeks, shown himself to be an opportunist, reacting to events rather than having any ideas of his own. The current government is the most radical since Thatcher – with reforms on several fronts and in areas she daren’t touch – but it is a government that is radical for the sake of being radical, just so they can leave office having said that they made their mark.

Every big idea, which has any ideological basis, has been shown to be empty. The so called ‘new politics’ was never credible. The big society is being shot down from every corner, and rightly so as the very agents of change, the voluntary sector, are being stripped bare, and the idea that “sunshine can win the day,” a finishing line from a Cameron conference speech, is now utterly laughable in the age of austerity. 

Ed Miliband, himself the son of a Marxist intellectual, should take the fight to Cameron on a grand platform that can be explained over a long period and has a sound ideology basis. The early signs look good; in a recent speech the Labour Party leader talked of the ‘British Promise,’ an idea similar to the American Dream that is based on the idea that subsequent generations should expect to receive better opportunities than their parents had. This is a start, simple to communicate and based on sound notions of social justice and family; it is the beginning of ‘Blue Labour’ – socialist ideals, framed within concepts of family, faith and flag i.e. conservative strong points.

Whilst I would like to see more aspects of liberalism, especially with respect to education policy, there is already weight to the ideals of Ed Miliband that David Cameron simply doesn’t have.