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

This report, published last week by the Institute for Fiscal Studies, estimates the impact on the labour market of increasing women’s state pension age from 60 to 61 on the employment of women and their partners.

The state pension age for women in the UK will ultimately rise from 60 to (at least) 65. The report analyses data from UK’s Labour Force Survey covering the first two years after the first increment in women’s pension age came into effect.

A copy of the report can be downloaded from here.

The findings include:

• statistically significant rises in both full-time and part-time female employment (a 7.3% increase in employment rates for these women);
• a 1.3% increase in the number of women who are unemployed and actively seeking work at age 60;
• women’s partners were also affected with men’s employment rates being found to incre ase by 4.2% as a result of their female partners’ state pension age increasing.

The report suugests that these changes in behaviour are due to ‘shocks’ or ‘signals’. First, a ‘shock’, resulting from many women failing to adjust to the increase in the female state pension age until they reach age 60;and secondly, a ‘signal’, where the state pension age affects social norms and indicates when stopping work might be appropriate.