Labour market responses to the rise in the state pension age for women

Author: Jonathan Cribb
Institution: Institute for Fiscal Studies
Type of case study: Research

About the research

The UK state pension age for women is on the rise, set to reach 66 in 2020.  Until this research, it was unknown how women in the UK would respond to a delayed receipt of their state pension benefits. Would they delay retirement and continue to work?

To help answer that question, this paper looks at the first effect of the 1995 Pensions Act, which increased the state pension age for women from 60 to 61 between April 2010 and April 2012. The authors were specifically seeking to understand how older people cope with delayed receipt of state pension benefits by studying how they respond to the gradual increase in the state pension age for women. The study exploits the fact that women born only a month apart have different state pension ages, and therefore allows for an estimation of the effect of increasing the state pension age on employment and retirement decisions. It also examines whether the policies influence certain couples’ decisions to retire at the same time. 

The findings suggest that increasing the state pension age for women by one year increased the employment rate of 60-year-old women by 7.3 percentage points; there was a significant, but smaller, increase in the employment rate of men with wives aged 60, by 4.2 percentage points. The increase in the state pension age for women also led to more women looking for work but unable to find it: the findings indicate an increase in the fraction of women unemployed of 1.3 percentage points.

This paper was introduced at the Nuffield Foundation in March 2013 to an audience including policymakers at the Department for Work and Pensions. The researchers were subsequently invited to present a seminar to policymakers at HM Treasury in April 2013 and their work was cited by the Office of Budget Responsibility in their Economic and Fiscal Outlook accompanying the 2013 Budget. This work has also been cited in the press multiple times, and discussed on BBC Radio 4’s Today programme.

Methodology

This data estimated the effect of raising the state pension age for women using a difference-in-differences methodology, a well-used methodology in applied economics and econometrics. It estimates the effect by comparing employment rates of individuals who are otherwise very similar, but are born a few months apart, which means that they have slightly different state pension ages.  The method allows the authors to control for other differences between individuals, such as their age, education, housing tenure and marital status.

Publications

The research findings were published in the following reports:

Cribb, J., Emmerson, C., and Tetlow, G. (2013) Incentives, shocks or signals: labour supply effects of increasing the female state pension age in the UK, IFS Working Paper No. W13/03, Institute for Fiscal Studies. doi: 10.1920/wp.ifs.2013.1303 Retrieved 28 August 2013 from http://www.ifs.org.uk/wps/wp1303.pdf

Cribb, J., Emmerson, C., and Tetlow, G. (2013) Women working in their sixties: why have employment rate been rising? IFS Observation, April, Institute for Fiscal Studies. Retrieved 28 August 2013 from http://www.ifs.org.uk/publications/6662

The research has also received media coverage:

BBC News (8 March 2013) ‘More women work past the age of 60, says the IFS’, BBC Business News [Web version]. Retrieved 28 August 2013 from http://www.bbc.co.uk/news/business-21704161

BBC News (8 March 2013) ‘Older workers’ job market ‘is robust”, The Today Programme [Radio podcast]. Retrieved 28 August 2013 from http://www.bbc.co.uk/news/business-21713415

The Economist  (6 April  2013) ‘Age concern: New research helps clarify Britain’s mixed employment record’, The Economist [Web version]. Retrieved 28 August 2013 from http://www.economist.com/news/britain/21575813-new-research-helps-clarify-britains-mixed-employment-record-age-concern

Hope, C. (8 March 2013) ‘Women spend longer in education – but earn less when they retire, OECD finds’, The Telegraph [Web version]. Retrieved 28 August 2013 from http://www.telegraph.co.uk/sport/olympics/9916254/Women-spend-longer-in-education-but-earn-less-when-they-retire-OECD-finds.html

King, M. (8 March 2013) ‘British women slip down scale on job security and equal pay’, The Guardian [Web version]. Retrieved 28 August 2013 from http://www.theguardian.com/money/2013/mar/08/british-women-equality-employment-scale

Wall, E. (8 March 2013) ‘Men work longer to retire at same age as wives’, The Telegraph [Web version]. Retrieved 28 August 2013 from http://www.telegraph.co.uk/finance/personalfinance/pensions/9915939/Men-work-longer-to-retire-at-same-age-as-wives.html

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