We hear from social policy expert John Macnicol on the coming changes to the state pension age - and why he believes the government should be considering the alternatives.
Raising the pension age: is it really worth it?
Posted on: Thu 19-Nov-15 11:03:28
(119 comments )
Retirement has long presented a challenge for advanced industrial societies: it contributes greatly to economic efficiency and workforce turnover, yet it is also very expensive in terms of State Pension costs. Recent years have seen moves to raise state pension ages in the UK. They are henceforth to be linked to life expectancy, so that they could rise to 68 by the mid 2030s and 69 by the late 2040s.
Many commentators, particularly those from the business sector, would like to see ages even higher than this. Ostensibly, this is being done in response to demographic and fiscal pressures. Yet the annual increases in longevity are relatively small, and the real problem is the size of the age cohorts that will move into retirement in the future (caused by high birth rates in the late 1940s and the mid 1960s and by net in-migration). A little-mentioned motive is the neoliberal strategy of attempting to create economic growth by expanding labour supply, plus the fact that raising state pension ages has been a cause on the political right for decades (for example, Mrs Thatcher's cabinet considered raising the age to 70 in 1989).
...working another few years might not present many problems for middle class, white collar people, but it will be an impossibility for those worn out by heavy manual labour.
Is this a wise strategy? The awkward fact is that there is no necessary connection between the size of a workforce and its total productivity: the latter is much more a function of factors like technology, the price of raw materials, a country’s industrial structure, and so on. One can see this clearly illustrated in the cases of Germany (considered to be a model of economic virtue) and Greece (considered to be economically dysfunctional in many quarters), both of which have remarkably similar average ages of retirement and proportions of their populations aged 65+. In addition, there are several troubling issues: whether extending working lives will damage the job prospects of the young – an especially sensitive issue at a time of high youth unemployment; the fact that, were state pension ages raised to 69 tomorrow, some 1,500,000 to 3,500,000 new jobs would have to be created; how to overcome the manifest class and regional unfairness that will be exacerbated, given that de facto retirement ages vary greatly by social class, as does life expectancy at later ages (there is a seven-year difference in life expectancy at birth between the top and the bottom social classes); finally, working another few years might not present many problems for middle class, white collar people, but it will be an impossibility for those worn out by heavy manual labour.
There are other, more imaginative, humane and realistic policy alternatives – but they have been hardly considered: a citizen's income for all aged 60+ to supplement the diminishing earnings that most older workers experience, payable as of right and replacing the state pension; 'age management' policies targeted at older workers; employment quotas for older people, and so on.
Some of these would be quite controversial – but the direction in which we are heading may prove to be even more so.
John Macnicol is Visiting Professor in Social Policy at the London School of Economics. His new book, Neoliberalising Old Age is published by Cambridge University Press and available from Amazon.