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We describe the history of state pension policy in the UK since 1948 and calculate summary measures of the generosity of the system over time and the degree to which the it created implicit taxes on, or subsidies to, work at older ages. The time series of these measures, calculated separately for 'example-type' individuals of different birth cohorts, education and sexes, are then related to the time-series of employment rates at older ages for the equivalent types of individual. The generosity of the system rose over the period as whole but has fallen in recent years, and in contrast to many countries there were generally never large implicit taxes on work arising from the state pension system. What implicit subsidies there were in the years immediately before the State Pension Age have been gradually eliminated and the system is now broadly neutral with regard to work incentives. Exploiting variation in pension wealth and work incentives across different cohort-education-sex groups, created by the timing and phasing of pension reforms, we show that both pension wealth and the implicit work disincentives in the pension system are correlated with employment outcomes for men, with the expected negative sign.
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Social security law --- Great Britain --- GB / United Kingdom - Verenigd Koninkrijk - Royaume Uni --- 368.43 --- 332.832 --- 332.834 --- 336.024 --- Ouderdomsverzekering. Voorbarige dood. Weduwen en wezen. --- Pensioen. Brugpensioen. --- Pensioensparen. --- Sociale begroting, rekeningen en uitgaven. Gezondheid.
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This paper examines to what extent differences in employment rates across those in better and worse health in the UK can be explained by the availability of publicly-funded disability insurance and the financial incentives provided by other retirement income schemes. Using an option value approach, we find that individuals' labor force participation is affected by financial incentives. A one standard deviation change in the option value is estimated to reduce the likelihood of an individual leaving the labor market in the next year by between 2.7 and 3.1 percentage points, relative to an average exit probability of 9.4%. This suggests the variation in financial incentives across different individuals could explain a significant proportion of retirements. However, we find no evidence that individuals with different levels of health respond to our measure of financial incentives differently. We also conclude that it would require a very large change in the stringency of the disability insurance program on its own to generate an economically significant change in overall employment rates of older workers in the UK. This reflects the fact that – for many individuals in the UK – the level of disability benefits they might be able to receive is low relative to the amount they could earn and, therefore, large changes in rates of eligibility would not induce large changes in overall employment rates.
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This paper estimates how much additional work capacity there might be among men and women aged between 55 and 74 in the United Kingdom, given their health, and how this has evolved over the last decade. The objective is not to suggest how much older people should work but rather to shed light on how much ill-health (as opposed to other constraints and preferences) constrains older individuals' ability to work. We present two alternative methods, both of which rely on constructing a 'counterfactual' employment rate for older people based on the behaviour of other similarly healthy individuals. Both methods suggest that there is significant additional capacity to work among older men and women, but that this has been declining over recent years for women (and possibly also for men). This latter finding suggests that the increase in employment rates among older people seen over the last decade are more rapid than would have been expected based on the improvements seen in health alone.
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We document employment rates of older men and women in the UK over the last forty years. In both cases growth in employment since the mid 1990s has been stronger than for younger age groups. On average, older men are still less likely to be in work than they were in the mid 1970s although this is not true for those with low education. We highlight issues with using years of schooling as a measure of educational achievement for analysing labour market trends at older ages, not least because a large proportion of men who left school at young ages without any formal qualifications, have subsequently acquired some. Reforms - such as the abolition of the earnings test and rises in the female State Pension Age, have pushed up employment rates. But other factors - such as the shift from defined benefit to defined contribution pensions being offered by private sector employers and the growth in employment rates at younger ages among successive cohorts of women - are also important. We discuss the role of other cohort and economy-wide trends, highlighting that the proportion of older men and women employed in professional, managerial and technical occupations has been particularly strong.
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