SUMMARY

  1.  Current fears about the "economic burden" of an ageing population are greatly exaggerated. Mechanical projections of the ratio of the numbers retired, or not working, to those at work neglect the fact people of 50 or 65 are healthier and more active today than they were 30 years ago, and will be more so in 30 years time. We should be providing more job opportunities for the over 50s and more flexible provision for retirement.

  2.  The scope for increasing activity rates among older people is illustrated by the fact that in the period March-May 2000 the activity rate for men from 50 to 64 and women from 50 to 59 was only 61.3% in Wales, as against 76.8% in the South East. These figures suggest that any effects of greater prosperity in leading to voluntary early retirement are more than outweighed by the effects of stronger demand in keeping people in jobs. Given a strong demand for labour and a greater willingness to employ older people, it is not difficult to envisage sufficient increase in activity rates to maintain the current ratio of workers to non-workers across the population as a whole, allowing for the expected decrease in the number of children.

  3.  It is time to recognise the scope for employing more older people who want to work. This depends to a large extent on changes in attitudes towards older workers, with employers being more prepared to tailor jobs to what they can do best, making use of their experience, while allowing for any possible physical limitations and desire to work shorter hours. It also depends on more flexible retirement provisions, allowing people more choice as to when to take their pensions and people in occupational schemes to draw part or all of their pensions while continuing to work part time.

  4.  A key aim of any pension reforms should be to establish greater stability in pension arrangements, whether in the state or private sector. The trend towards means-testing, and allowing the basic state pension to wither away, implies the state is withdrawing from the provision of pensions earned by contributions during people's working lives—and merely providing a safety net which will increasingly discourage private saving and retirement provision among the less well paid. Instead of indexing the basic state pension to prices, it should be set at an adequate fixed percentage of average national earnings, and this relationship should be maintained from year to year.

  5.  The provision of earnings-related pensions to supplement the state pension cannot be left entirely to private occupational schemes or private savings in some form. The state should also play its part, for example by revitalising the earnings-related element of the State Second Pension.

  6.  Increased longevity and health among older people suggest that the standard age of retirement in both state and private schemes should be increased over the course of time. No change in the minimum state pension age would be practical before 2020 when the age for women has been brought up to that for men, but thereafter some gradual further increase should be envisaged.

  7.  We should avoid any panicky response to the present apparent crisis in occupational schemes, caused by the fall in stock market prices. Employers' contributions to these funds do not necessarily have to be altered in response to short term changes in asset prices: the level of contributions has to be determined in the light of actuarial of future expenditure on pensions and the probable stream of income from the funds' investments. Temporary accounting deficits on a snapshot basis for balance sheet purposes do not necessarily a need for higher employers' contributions

FORECASTING SUPPORT RATIOS

  8.  The favourite device for substantiating the notion of the ageing crisis is the rising dependency ratio, or its inverse, the falling support ratio. The support ratio measures the number of people of working age for each older person, with "working age" defined as everyone aged between 16 and 65 for men, or 60, at present, for women, rising to 65 between 2010 and 2020, and "older people" everyone above those ages. This ratio is estimated to fall from about 3.4 today to a trough of 2.4 in 2041[15]. At first sight, it seems logical that as there will be progressively fewer people of working age to foot the bill for each pensioner, the cost of supporting elderly people will escalate to a level that is unsustainable. But the number of working people "supporting" each pensioner has already fallen much more dramatically from 14 in 1900 to four in 1990.

  9.  The support ratio is extremely misleading as an indicator of what is claimed to be the "unsustainable" burden of rising elderly dependency. First, with rising productivity each of these supporting workers will be much more productive in 40 years time. On present trends the worker in 2041 will probably be the equivalent of more than two workers today. Comparing the support ratio over time is therefore not measuring like against like. Again the rise in the proportion of elderly people tends to be at least partly offset by a fall in the proportion of those below working age. For example, in Britain between 1979 and 2000 the number of people above state pension age rose by 1,074,000 while the number of young people under 16 fell by 877,000, reducing the net rise in dependants to only 197,000. But in the same period the "working age" population rose a generation on from the post-war baby boom. When translated into dependency ratios, the consequence was that while the elderly ratio rose from 28.4% to 29.9%, the proportion of the population under16 and above pension age to those of "working age" fell from 66 to 62%.

  10.  Over time the overall age dependency ratio is remarkably constant. Today it is even lower than it was at the end of the baby boom in the late 1960s, and lower too than at the end of the nineteenth century. This relative stability of total age dependency ratios is no coincidence. The inevitable corollary of ageing populations is a falling proportion of young people. This is more that a statistical truism. Over long periods falling fertility has been the main contributor to population ageing, reinforcing the decline in youth dependency ratios to offset rising elderly dependency ratios.

  11.  Of course there is no inevitability that there is an equivalent financial trade off between the average annual cost of raising a child up to working age and supporting an average person in retirement. The relative costs will vary both historically and between countries. Studies have produced estimates showing ratios both above and below equivalence. Whatever the precise relationship there is clearly substantial financial compensation from falling youth ratios.

  12.  It is also a myth to imagine that all people of "working age" work and contribute to economic wealth, and that all those over state pension age do not work. Illustrating the latter point, in Britain in 1999 15% of men between 65 and 69 were economically active and 30% of women between 60 and 64.

  13.  Even more significant numerically today is that millions of people of working age do not work—in Britain about nine million. In most advanced countries this represents between a quarter and a third of the working age population. So a truer ratio of dependency would measure the aggregate number of pensioners (ignoring the fact that some work for the purposes of this illustration), children and non-working adults of "working age" compared to the number of people employed. (Further adjustments could reflect the effect of the growth in part-time work by measuring full-time equivalents and recognising that not all workers pay tax and NICs.)

  14.  Two consequences follow from looking at the total dependency ratio. First, the increase in this ratio anticipated on the basis of the official ageing projections over the next 30 years is about 14%, only a quarter as large as the increase in the elderly dependency ratio. And more importantly, labour market changes are a much more significant influence on this real or economic dependency ratio than shifts in the age balance.

LABOUR MARKET ACTIVITY AND EMPLOYMENT RATES

  15.  Changes to labour market activity rates, and especially employment rates, can affect the real support ratio much more than the changing age structure. Participation rates (those of "working age" who want to work) and employment rates (those in work) are more variable and volatile than the age structure of a population. They reflect changing economic conditions, the level of demand for labour, and wider social changes—such as more women in work, and the expansion of higher education reducing the number of younger workers. Such factors are potentially much more under our control than the age structure.

  16.  As an example of the greater importance of labour market factors over demographic ones take what happened in Britain over the period 1979 to 2001—which both represent peaks in the economic cycle. The number of people over state pension age rose by about one million. Meanwhile the increase of the "working age" population not working—the unemployed, the otherwise inactive, and those on government training programmes—was about 0.6 million. So this labour market change contributed nearly as much as the demographic one in its upward effect on the dependency ratio. Nonetheless the number of people in work rose by over three million. So other labour market changes during this period meant the number of people in work grew about three times more than the increase in elderly dependents (and even outweighed the combined total increase in elderly and working age dependents combined). This illustrates how changes in the labour market can have more impact on real dependency rates than changes in the age structure.

  17.  One of the main upward influences on employment levels during this period was the increase in the number of working women. Female employment rates grew significantly from about 61% to 69% representing a net addition of over 2.5 million in employment. [16]

  18. Most would agree that some link exists between the increase in the number of working women and the falling fertility that underpins population ageing. Hence the same trend of falling birth rates which boosts the elderly dependency ratio is also related to the increase in participation rates by women thereby boosting the size of the economic cake from which all dependents share. If more employment opportunities were available, especially of a sufficient quality and with adequate childcare facilities, it is doubtless the case that even more women would seek to work.

  19.  Economic and social factors can therefore have as much or more of an impact on the production of economic wealth as the net movement in numbers of people of below and above the state pension age. This is crucial for any assessment of the adequacy of the resources required to support the genuinely dependent section of the population. Yet the issue of employment rates is generally ignored or downplayed in most presentations of the burden of ageing.

INCREASING EMPLOYMENT RATES

  20.  In so far as demographic ageing is in danger of producing any net decline in the real support ratio, there is plenty of scope for increasing the active labour force to compensate. This is partly a matter of providing more job opportunities for older people, but also for the large number of people of "working age", particularly in the older industrial regime.

  21.  For example, the UK's Government Actuary's Department estimates that the number at work in 2030 would be 27.2 million or 44.5% of the total population of 61.1 million as compared with 27.6 million or 47.8% of a total 57.7 million in 1999. To maintain the same ratio of workers to dependents in 2030 would require 47.8% of 61.1 million or 29.2 million workers representing another two million people in work. An extra two million workers in Britain would mean an increase in the employment rate by about 5%. There are a number of comparisons we can make which indicate that this is an achievable goal, especially over a period as long as 30 to 40 years.

  22.  First, as between countries, if Britain raised its employment rate to the level of Sweden or Denmark today that would do it. Or comparing over time, men's employment rate in 1960 was 95% and this has fallen to 78% in 2001. To reverse that trend by about two thirds would alone meet our requirement, assuming everything else was the same, and especially the unrealistic assumption of no further growth in women's activity rates.

  23.  Alternatively, much of the average 5% change required across the working population could result from increased participation rates where participation is relatively low now. Taking the gender issue: female employment rates today are about 65% against the male 78%. If female rates continue to rise and plateau at about 74%, most of the required increase would be achieved: this is hardly impossible as it represents the current level of female employment in Sweden and Norway. [17]Given that the baby boom generation of women is more equally engaged in social production, we can anticipate that participation rates for women in their 40s and 50s and, perhaps to a lesser extent, 60s will increase markedly over the next 20 years. This particular example of female employment shows both how "spontaneous" labour market changes can offset the economic impact of ageing populations, and also the potential for policy measures to increase employment rates to the benefit of all—working and non-working.

EARLY RETIREMENT: MYTHS AND REALITY

  24.  One of the factors that has compounded fears about the burden of pensions is the perceived trend towards early retirement, whereby men and women drop out of the labour force well in advance of state pensions age and add to the burden on occupational pension schemes. In teaching, the police and the fire service for example, the resulting deficits in pension schemes have already required additional contributions from the public purse, to some extent at the expense of on-going service provision.

  25.  The trend towards early retirement is neither so widespread nor so inevitable as first appears. For a start, in the UK labour market the trends for men and women are divergent. More women in general, including more older women, are now in employment than ever before, and there is as yet little sign of this long-term trend reaching a peak. It is only among men that disengagement from the labour market—or "economic inactivity" as it is usually labelled—is actually rising. Prior to 1980 about 75% of men between 55 and 64 were active; today it is 60%.

  26.  Rising economic inactivity among older men is far from synonymous with early retirement. Surveys show that only about a third of non-employed 50-64 year old men describe themselves as "retired from paid work altogether". Amongst these older men, dependence on other benefits is in fact far more widespread than reliance on a pension. The surge in the number of older men who have dropped out of the UK labour market most of all reflects the rising number on Incapacity Benefit—nearly 1.5 million men in total, of whom 0.8 million are aged 50-64.

  27.  These Incapacity Benefit figures too are not all they first seem. While Incapacity Benefit claimants undeniably suffer from health problems (this is the basis of their benefit entitlement) in practice the figures mask very substantial unemployment. [18]Many of these men would have been working if jobs had still been available for them. Many still express a desire to work. In other words, a large part of the rising labour market detachment among older men is a reflection of weak labour demand rather than economic success or a preference for leisure over employment.

  28.  The geography of early withdrawal from the labour market underlines this point. In the most prosperous regions of southern England, employment rates among older workers remain high; it is in the older industrial areas of the North, Scotland and Wales that they have fallen to low levels. In Spring 2000, 70% of all 55-64 year old men in the South East region were in work, compared to just 42% in the North East. The comparable figures for women aged 55-59 were 64% in the South East and 45% in the North East. It seems that if the local demand for labour is strong enough, people will want to stay in employment longer.

  29.  The regional contrasts point to an army of labour that could in theory be re-engaged with the labour market and reduce the ratio between dependents and the working population. If employment rates in all UK regions were raised to the level currently prevailing in the South East, around 300,000 additional men aged 55-64 would be in work and an additional 130,000 women aged 55-64. Raising employment rates among 45-54 year olds up to the South East level would bring into work a further 220,000 men and 260,000 women.

  30.  There is also potential for raising employment among men and women above the present state pension age. Indeed, as the pension age for women is raised progressively to 65 by 2020—a change that is already planned—growing employment among 60-64 year old women is more or less inevitable. Raising the employment rate among this group of older women to the same as for 60-64 year old men has the potential to add yet another 300,000 to the workforce. Beyond 65 the scope for even more additional employment among those who want to remain in work is at present virtually unexploited.

  31.  All these figures point to the possibility of offsetting much of the anticipated growth in the population of pensionable age through the creation of suitable opportunities rather than via compulsion or individual economic necessity. An alternative forecast to the GAD's projections in the Appendix suggests that it would be reasonable to achieve an employment level in 2030 two million higher than they assume. Labour market change on this scale cannot be expected to happen overnight—but nor does the increase in the population of pensionable age. It might take the best part of two decades to bring employment rates in the weaker regions nearer to the levels currently prevailing in the South East, but this is a perfectly reasonable and potentially achievable target

  32.  Making it easier for older people to have the opportunity to work does not need to stop at age 65. People over the current designated pension age for men do not suddenly change from being productive citizens to being worthless dependents. Many older people today are both capable and keen to contribute to society economically and in other ways. It is incorrect to assume that today all people above state pension age have fallen out of the labour market. As healthy life expectancy rises the numbers of old people capable and wanting to work will rise too.

  33.  The same trend of increased longevity which is one of the contributors to population ageing brings with it not just more old people but fitter and healthier old people. Specifically the generation who will contribute most to the peak in ageing in about 30 years time—the baby boomers—will be healthier than any previous generation. So not only is it misleading to stereotype the future elderly as in near-permanent need of heath care, but many will want to continue to work in some form.

  34.  The elderly should have greater freedom and flexibility to choose whether to work and what type of work to do. Not to do so would be a tremendous waste. As Felicity Huppert remarks about forced retirement at the current statutory pension age: "For the individual older person, the resulting financial difficulties may be compounded by loss of social roles and a reduction in well-being and cognitive functioning. At the societal level, we should ask ourselves whether we can afford to squander this enormous reservoir of human potential, expertise and accumulated wisdom".[19]

  35.  Retirement ages both for state and private pensions should be made more flexible. It is for consideration whether it should be illegal (as in the US) for firms and institutions to have compulsory retirement ages. If flexible retirement became more acceptable, we would have another almost spontaneous force offsetting the additional financial cost of more dependent elderly. More of the non-dependent elderly would themselves contribute through work to help expand national output.

  36.  Apart from any concerns about an insufficiency of workers to produce enough for the greater number of pensioners, a policy commitment to establish the conditions for higher employment rates, especially for older people in their 50s and 60s, is a good thing in itself. Moreover it can contribute to enhanced wealth creation, which is to everyone's benefit—young and old, working and non-working. History reassures us that society in the past has been able to cope with ageing populations on the basis of its normal rhythm and spontaneous processes. With a helping hand from policy, prosperity and living standards can rise even faster for all of us.

PENSIONS

  37.  Exaggerated fears about the economic effects of increased longevity have had a major effect on pensions policy. Not only national governments, but also international organizations like the OECD, have joined the call to cut the cost of pension schemes.

  As with the projections for the United Kingdom discussed above, much of this concern is based on mechanical projections of employment rates which fail to take proper account of the scope for older people working longer. They have, however, provided ammunition to those who wish to cut back the role of the state to attack state pension schemes. This has gone hand in hand with the call for "funded" schemes where future liabilities are covered by present assets, as in a typical private scheme. It is a fallacy, however, to assume that funded schemes will avoid the problems of "pay as you go" state schemes.

  38.  The distinction is specious because while funded schemes provide pensioners with a financial claim on resources, they do not provide the resources to meet that claim. Pensioners' consumption is a claim on current production that has to be met at the expense of consumption by the working population. This restraint may come from those at work paying state pension contributions or private contributions to their own future pensions. But in either case it is what current workers are paying that liberates resources for the retired. In real terms all pensions are "pay as you go". The fallacy of the funded scheme argument can be seen by hypothesising that all the people retiring in 2030 pay into a fully-funded scheme which then comes to an end. In that case the scheme is liberating no resources to meet the pensioners' consumption. The real argument for private schemes is not that they are funded, but that people may be more willing to pay into a private rather than a state scheme, if the contributions appear more closely linked to their own future needs.

  39.  We need pension schemes, public or private, which provide those who are retired with an adequate income compared with what they were receiving at work, and give them the security of knowing throughout their working lives the approximate level of pension they will be entitled to when they retire. The type of private pension scheme which best satisfies these two criteria is the traditional final salary (or revalued average salary), defined benefit occupational scheme which was for many years the mainstay of middle class retirement provision. But firms are now beating a hasty retreat from these schemes, in favour of money purchase or defined contribution schemes where the employee, rather than the employer, eventually bears all the risks arising from variations in stock market prices and interest rates. State earnings related pensions, which most other EU countries now have, can play a similar role to defined benefit occupational schemes—provided governments do not change the rules in mid course, as they have done with SERPS in this country. Similarly people can no longer have any secure expectation of what they will receive from the basic state pension, now there is no longer any commitment to index it to average national earnings.

  40.  A key aim of any reforms should be to establish greater stability in pension arrangements, whether in the state or private sector, so that people know better where they stand. This requires a measure of political consensus—or at least arrangements that will deter any Government from making ill-considered changes in future pension rights, while recognising that, over the period of half a century during which individual pension rights accrue, some changes may be necessary. One approach might be to set up an independent body responsible for reviewing the state pension system periodically and recommending any changes that might be needed on financial, demographic or other grounds, while respecting to the greatest possible extent the rights built up by past contributions.

STATE PENSIONS

  41.  The three potential components of state retirement provision are a basic pension, an earnings-related pension and means-tested benefits. Since the 1980s the emphasis has shifted increasingly towards means-tested benefits. The advantage to the Treasury of this shift is that it makes it possible to provide a minimum standard of benefit at a lower cost than a basic state pension paid irrespective of means. The disadvantage to the public is that more and more people will no longer receive their benefits automatically as of right, but only by courtesy of officialdom after scrutiny of their other income and savings. Because of the complexity and stigma of the means tests, many of the poorest pensioners do not claim.

  42.  As pensioners will increasingly be reliant on means testing (over half by 2003 with the introduction of the Pension Credit) their income will no longer be regarded as the fruit of a working lifetime's contributions, but more of a hand-out from the taxpayer. This is perverse when we need to encourage saving by those at work in order to liberate current output for consumption by those who have retired. This points in the direction of putting more, not less, emphasis on the link between National Insurance contributions and entitlements. However, this leaves the problem of people (in the past particularly those who had caring responsibilities and married women) lacking a full contributory record because they have not been in continuous paid work, or have paid the reduced married woman's contribution when in paid work. Women are particularly liable to end up with inadequate pension rights and make up a disproportionate share of the number of pensioners living in poverty. One approach is to give them credits for periods of family caring or, as in the basic pension, Home Responsibilities Protection. A second option is providing pensions to married women, widows and divorcees based on their husband's contribution record but this has the drawback that it fails to help cohabitees and single women whose caring commitments have restricted their employment while paying pensions to married women who may have been childless and able to work continuously. A third approach, proposed by Holly Sutherland and the Citizens Income Trust is to provide a residence-based Citizen's Pension to each pensioner irrespective of their contribution record and marital status, as in New Zealand and the Netherlands. It is arguable that couples do not need as high a pension as two individuals living on their own, but as increasing numbers of retired couples are cohabiting, treating people as individuals irrespective of living arrangements may be a practical necessity.

  43.  Unless the basic state pension or Citizen's Pension is indexed to average national earnings rather than prices, it will become increasingly inadequate and will sooner or later be phased out, leaving an entirely means-tested system of state retirement benefits. A basic requirement of any stable, continuing system must be to set the basic pension at an adequate fixed percentage of average national earnings and maintain this relationship from year to year. This should limit the need for supplementary means-tested benefits to a minority, such as recent immigrants, and so encourage people to save for their retirement.

  44.  The provision of earnings related pensions to supplement the basic state pension, or means-tested minimum, can be either a matter for a state scheme, private occupational schemes with employer contributions, or private savings in some form. All but two other EU countries (the Netherlands and Irish Republic) have state earnings related pensions. The proposal that the new State Second Pension should become flat rate before 2010, leaving no state earnings related pension scheme at all seems perverse just as the weaknesses of private occupational and individual pensions are becoming increasingly evident. A flat-rate State Second Pension, reaching maturity only in the second half of this century and with all the complications and costs of contracting out, would be an unsatisfactory substitute for an adequate basic pension and would do nothing to improve the situation of today's pensioners. Instead, it is time to consider how the earnings-related element of the State Second Pension could be revitalised to provide a genuine alternative to funded second pensions.

PRIVATE PENSIONS

  45.  Any review of the role of private occupational schemes must be based on a long-term view, rather than a panicky reaction to their current difficulties. The viability of such schemes depends on their ability to meet future expenditure on pensions from their investment income. Short-term fluctuations in stock market prices do not necessarily call for changes in employers' contributions to the funds. The level of their contributions has to be decided by the scheme's trustees in the light of an actuarial valuation of future income and expenditure. The accounting valuations of funds, as a footnote to companies' balance sheets, recently highly publicised by the adoption of FRS 17, give a snapshot view of the fund's future liabilities in relation to the capital value of its current assets; but they do not necessarily indicate whether contributions need to be raised (or lowered).

  46.  Thus the current emphasis on the number of schemes in deficit gives a misleading view of the general state of occupational schemes, and is being misused by some firms as an opportune pretext for closing their defined contribution scheme. In so far as schemes are running into deficit, this is partly attributable to three factors: employers' contribution holidays; the withdrawal of Advance Corporation Tax relief; and over-generous use of early retirement packages.

  47.  Fear of the need for increased employer contributions has led to a move away from final salary schemes to defined contribution schemes, with employers cutting or abolishing their own contributions. But without employer contributions, there is little benefit to the employees in being in a company scheme rather than a private money purchase arrangement of their own choosing. The latter, of course, are also predicting drastically reduced pensions because of the fall in the stock market, a serious problem for those nearing retirement.

  48.  While employers may regard company schemes as a means of holding on to good staff, their long-term advantage to employees depends partly on the conditions for transfer into similar schemes. The most advantageous situation is where, as in parts of the public sector, people can transfer with so many years' credits—rather than a Cash Equivalent Transfer Value. This is because the years' credits subsequently become increasingly valuable as the individual is promoted, or moves up the salary scale.

  49.  The simplest case for the continuation of occupational schemes is that most people would prefer to receive part of their salary (tax free) in contributions to a reliable defined benefit scheme managed for them. The tax relief on employees' contributions does, however, disproportionately benefit the highest earners, particularly men, and runs counter to any redistributional features of the state system. If defined benefit schemes give way to defined contribution schemes without employer contribution, there will be little support for occupational pension schemes and hence greater need for an effective state earnings related scheme, with a compulsory employers' contribution. The possibility of making employers' contributions compulsory at a higher level than at present, as in the Australian Superannuation Guarantee Charge, should be examined. This proposal, however, implies much greater reliance on defined contribution schemes, membership of which, in the absence of a satisfactory state earnings related scheme, would be virtually obligatory for millions of working people.

  50.  More flexible working for older employees needs to be linked to more flexible retirement provisions. As in state schemes, private schemes should allow people to continue working after the standard retirement age and thereby accrue a higher pension. There should also be provision for people working part-time after the standard pension age to draw all or part of their pensions.

  51.  Increased longevity and health among older people suggest that retirement ages which were appropriate 30 or more years ago will no longer be appropriate in 30 years time. It would therefore be reasonable to assume that over time the standard state pension age should gradually be raised, and that private schemes should follow suit. No such change would be practical before the standard age for women has been brought up to the men's level in 2020. But thereafter some gradual further increase should be envisaged—either on the basis of an agreed statutory formula (eg one year every 10 or 15 years) or on the recommendation of the independent pensions review body suggested above. In either case, such changes should be made in small steps and with adequate notice.

A SOCIAL COMPACT

  52.  The worst pensions policy is to encourage panic economy measures based on unrealistic assumptions about the numbers of people still working and the ages at which they retire. The need is for a social compact on a stable and adequate state pension system, supplemented by occupational schemes to which employers provide adequate contributions together with individual pension schemes and savings plans.

15 January 2003

EMPLOYMENT RATES

  The Government Actuary's Department estimate that the numbers at work in 2030 would be 27.2 million or 44.5% of the total population as compared with 27.6 million or 47.8% in 1999. It would therefore need another 2.0 million people at work to maintain the same ratio of workers to dependents. Examination of the Government Actuary's assumptions about "activity rates" (ie the proportion of people in the labour market) at different ages suggests that such an increase is quite possible.

  The attached table shows the GAD estimates of activity rates in 1999 and 2030 and an alternative estimate for 2030 assuming that by then men and women are working longer. On these alternative assumptions there would be nearly 1.8 million more people over the age of 55 at work, one million of whom would be women. Health apart, activity rates for older women seem likely to increase appreciably as the higher proportion of younger women now working grow older. These estimates are based solely on assuming higher activity rates for the over 55s. But the GAD figures make the debatable assumption that activity rates for men aged 25 to 55 will fall. If instead they were assumed to remain constant, this would mean a further 200,000 men would be at work, bringing the total increase to 2.0 million.

The first column (for both men and women) shows activity rates (percentage of people of working age seeking or at work) for 1999, and the second the estimate used by the Government Actuary for 2030 in Table 14.1 in his Quinquennial Review of the National Insurance Fund (Cm 4406, July 1999) The alternative estimate in the third column gives greater weight to the desire of older people to carry on working and to the effects of raising the state pension age for women from 60 to 65 by the year 2020

Total additional active over 55	1,843
less 4.7% unemployed(GAD estimate)	87
Total additional employed	1,756

(b)  24-54 (assuming 1999 activity rates)
Age	Men
25-34	85
35-44	104
44-54	44
Additional active	233
Less 4.7% unemployed	11
Total additional employed	222
Note:
The difference between the two activity rates for 2030 has been multiplied by the Government Actuary's population forecasts by age group for 2030 in Table 13.1 of the Quinquennial Report.

15   Quinquennial Review of the National Insurance Fund (CM 4406) Government Actuary's Department, 1999. Back

16   OECD Labour Force Statistics. Back

17   C. Beatty and S. Fothergill, Labour market detachment among older men, CRESR, Sheffield Hallam University, 1999. P. Alcock, C. Beatty, S. Fothergill, R. Macmillan and S. Yeandle Work to Welfare : how men become detached from the labour market, CUP, Cambridge, 2002 (forthcoming). Back

18   C. Beatty and S. Fothergill, Incapacity Benefit and Unemployment, CRESR, Sheffield Hallam University, 1999. R. McKay, "Work and nonwork : a more difficult labour market", Environment and Planning, Vol. 31, 1999 pp.1919-1934. D. Webster, "Unemployment : how official statistics distort analysis and policy, and why", Radical Statistics, 2002. Back

19   C. Beatty and S. Fothergill, Labour market detachment among older men, CRESR, Sheffield Hallam University, 1999. P. Alcock, C. Beatty, S. Fothergill, R. Macmillan and S. Yeandle Work to Welfare : how men become detached from the labour market, CUP, Cambridge, 2002 (forthcoming) Back