Incentives, shocks or signals: labour supply effects of increasing the female state pension age in the UK

Document type
Working Paper
Author(s)
Cribb, Jonathan; Emmerson, Carl; Tetlow, Gemma
Publisher
Institute for Fiscal Studies
Date of publication
8 March 2013
Series
IFS working paper; W13/03
Subject(s)
Employment, Poverty Alleviation Welfare Benefits and Financial Inclusion
Collection
Social welfare
Material type
Reports

Download (548KB )

In 1995, the UK government legislated to increase the earliest age at which women could claim a state pension from 60 to 65 between April 2010 and March 2020. This paper uses data from the first two years of this change coming into effect to estimate the impact of increasing the state pension age from 60 to 61 on the employment of women and their partners using a difference-in-differences methodology. Our methodology controls in a flexible way for underlying differences between cohorts born at different times. We find that women's employment rates at age 60 increased by 7.3 percentage points when the state pension age was increased to 61 and their probability of unemployment increased by 1.3 percentage points. The employment rates of the male partners also increased by 4.2 percentage points. The magnitude of these effects, and the results from subgroup analysis, suggest they are more likely explained by the increase in the state pension age being a shock or through it having a signalling effect rather than them being due to either credit constraints or the effect of individuals responding to changes in their financial incentives to work. Taken together, our results suggest that the fiscal strengthening arising from a one-year increase in the female state pension age is 10% higher than a costing based on no behavioural change, due to additional direct and indirect tax revenues arising from increased earnings.

Related to Employment

What has been happening to career progression

Briefing on the impact of coronavirus on productivity and pay growth

The time of your life: time use in London and the UK over the past 40 years

Report on time use in London and the UK over the past 40 years

Extending the Coronavirus Job Retention Scheme to short-time workers

Briefing on government support for workers during lockdown

More items related to this subject