The Logistics of Increasing the Pension Age

[hmmm_tea]

So, there's a lot of talk of increasing the pension age, which have come to the fore today as the Tories want to bring moves to increase it to 66 for men forward to 2016 in order to save government money. It doesn't seem to add up though.

According to the the office of national statistics we had around 300,000 males 65 years of age in 2008. Even if half of them go for early retirement that leaves 150,000 extra workers in the system each year. Where do the extra 150,000 jobs come from?

Add women in their early 60s to that and you've got even more extra jobs to find when we already have an issue with unemployment.

Surely, unless we can magic up extra jobs from somewhere, we're just transferring that number of people from being supported by the government via the pension system to being supported via unemployment benefits?

In short it sounds to me like increasing unhappiness (as unemployment generally sounds more stressful to me than unwanted retirement) for the sake of a false economy.

Comments

How Governments Work

[fiat-knox.livejournal.com]

They only quote numbers when it suits them. When it doesn't suit them, they wave flags and stamp their feet, and hope that people will be too caught up in the chanting of slogans to ask "Hang on ... this doesn't add up ..."

Re: How Governments Work

[hmmm-tea.livejournal.com]

All too true.

It bothers me that government seems to revolve around whips and spin doctors.

[helflaed.livejournal.com]

I'm amazed that they actually seem to think that doing this will pay for replacing the link between earnings and pensions. Plus, I think it is very unfair indeed that women should be allowed to retire on a state pension earlier, and they don't seem to want to do much about that. Either both at 60, or both at 65- you can't have it both ways.

Mind you- the more they come out with policies like this one, or cutting incapacity benefit, the better so far as I am concerned, because I'd rather see it now, before an election than afterwards.

[hmmm-tea.livejournal.com]

They are planning to raise the age for women too, but to 63 not to be equal with men initially.

I would certainly agree they should be the same.

[hmmm-tea.livejournal.com]

Yes, but that shouldn't be an issue.

Pensions are there to ensure that all citizens are able to afford to meet their basic human needs as they grow older. These needs do not depend on whether you've been earning enough to contribute to national insurance, so the pension shouldn't either.

In fact if anything it should be the other way around. People who have been earning will be more likely to have enough to look after themselves, so perhaps the answer is to do away with the current state pensions altogether and extend the pension credit system as a means tested replacement?

[ewx.livejournal.com]

This article suggests that employment has been rising among 50-65yo men over the last ten years anyway, so (to the extent that it's a problem) it's one we already have, albeit not necessarily on the same scale. (See the chart on p13.)

The proportion who retire early is an important part of the argument, although of course not entirely: if the state pension kicks in a year later then some people may delay their early retirement by another year, so that they spend the same amount of time unemployed before the state pension kicks in. Still, I'd be hesitant of basing any conclusions on unsupported estimates.

I also wonder about the reality of the “extra” jobs: their existence assumes that each retiree would be replaced at all, which isn't a given. Some jobs may simply stop being done, or be distributed among other staff, or be automated, when someone retires out of them. As a couple of examples: (1) my barber wasn't (at least directly) replaced by another barber when he retired, his shop just closed; (2) I can think of at least one person who left a past employer of mine without their role being filled - instead existing staff were reorganized.

Remember also that the government is trying to encourage people to stay in education longer, reducing the supply of labor at the other end of the age scale.

[hmmm-tea.livejournal.com]

Looking at that chart (reading the rest of the article will have to wait for now I'm afraid), although there is an increase from 1996-2003, it appears to level out from then on. Although current unemployment levels could go a long way to explaining the last few years.

In terms of your barber, did you stop having your hair cut when he retired or did the work just move elsewhere?

I'm not opposed to people having to work later in their lives, but I don't believe this is the magic economic fix it is being made out to be. It is clearly going to affect unemployment to some extent or other (although my argument above is admittedly heavily simplified).

Also, the rich will still have the option of early retirement so will be less affected meaning it's the poor that are being asked to work longer to boost the government funds.

[ewx.livejournal.com]

I got my girlfriend to cut my hair instead. I don't know what the rest of his customers did though!