Stung by Pension Reforms: The Impact of a Change in State Pension Age on Women and their Partners

In many developed countries, pension systems are being reformed by increasing the age eligibility to receive the state pension and by reducing its generosity.  The aim of these reforms has been to improve the financial sustainability of the system by encouraging people to work at older ages.

Up to now, the pension reforms in the UK have mostly affected women born in the 1950s, who have seen their pensionable age increase from 60 in 2010 to 65 in 2018 and 66 in 2020.  As the state pension age continues to increase, many more men and women will be affected in the future.

We compare women in the UK who are similar in terms of marital status, education, and many other factors, but who were born only a few months apart and therefore, due to the reform, have different state pension ages.  Our results suggest an overall negative impact of the reform, which mostly affects more vulnerable women.

Those women who are slightly younger and need to wait longer to reach their state pension age are more likely to be in employment and work longer hours than those who are slightly older and have already reached their state pension age.  Hence, the increase in the state pension age had the desired effect of keeping more women in employment.  However, we also find clear negative effects on mental health and on other aspects of wellbeing.

Crucially, the reform had a more negative impact on some groups of women than others.  For both women with and without a university degree the reform has led to a similar increase in the chances of being active in the labour market (either employed, self-employed or seeking work).  However, while those with a degree are more likely to be in employment, for those without a degree there is also an increase in unemployment.  It is women without a degree who experience a negative effect on mental health, are more likely to say they struggle financially, that they have problems paying bills, and have lower level of satisfaction with their income.  In contrast, among women with a university degree the effect is overall close to zero or possibly even positive.  This may be because women with a university degree are more likely to hold highly paying – and possibly more satisfying – jobs.

The reform also had a more negative effect on women without a partner.  We find a similar increase in employment among women with and without a partner, and that both experience a worsening in mental health and satisfaction with life, but these negative effects are much larger among women without a partner.  While all affected women are much more likely to say they struggle financially, have problems paying bills and have lower level of satisfaction with their income as a result of the change in the state pension age, the negative effect is much larger among women without a partner.  As women who are living with a partner can rely on additional income and support from their partner, the change in the state pension age has increased inequalities in wellbeing.

Our new results on the direct and indirect effects of the pension reforms in the UK are likely to be applicable also to other countries that are seeking to implement similar pension age reforms.  It is important that the positive fiscal impact of the increase in the state pension age is measured against the negative effects on wellbeing and the increase in inequality between those who can and those who cannot afford to retire at their preferred age.  Additional inequalities created based on level of education and on family structure should also be considered.

Della Giusta, M., Longhi S. (2021) Stung by Pension Reforms: The Unequal Impact of Changes in State Pension Age on UK Women and their Partners, Labour Economics72:102049.

Does Geographical Location Matter for Ethnic Wage Gaps?

We know that ethnic minorities in Great Britain are paid less on average than White British people.  We also know that ethnic minorities are more likely to live in deprived areas with lower job opportunities.  Does location matter in shaping ethnic wage gaps?

This research measures ethnic wage gaps by comparing minorities to majority workers in the same local labour market and focuses on the variation of wage gaps across areas. As wage gaps vary across areas, using one single national measure may be misleading. Higher wage gaps across groups are associated with higher occupational segregation and ethnic diversity, while higher wage gaps within groups are associated with higher regional specialisation and proportion of co‐ethnics. Policies could help by improving job location and selection into occupations across groups.

Longhi S. (2020) Does Geographical Location Matter for Ethnic Wage Gaps?, Journal of Regional Science, 60(3): 538-557.

Unhappiness in Unemployment: Is it the Same for Everyone?

Many studies have shown that there is a general tendency for men’s subjective wellbeing to be more badly affected by unemployment when compared to women, although the extent varies across countries. The existing literature notes the gender differences and offers possible explanations, but does not formally compare competing hypotheses. We analyse whether gender differences in life satisfaction associated with the experience of unemployment can be attributed to degrees of specialisation in the labour market, differences in the types of work undertaken by men and women, differences in personality traits, work identity or gender norms. We find that it is not all, but some, women who suffer less than men when experiencing a transition into unemployment. The experience of unemployment for women is differentiated by pay, work identity and, most powerfully, gender attitudes.

Longhi S., Nandi A., Bryan M., Connolly S. Gedikli C. (2018) Unhappiness in Unemployment: Is it the Same for Everyone?  Sheffield Economic Research Paper Series no. 2018007.
Also appeared as a Research Report on Gender and Unemployment for the What Works Wellbeing Centre.

The Diversification of Inequality

We examine intersectionality on the basis of increasingly complex interactions between gender and ethnic groups, which we argue derive from the growing diversity of these groups. While we critique the concept of superdiversity, we suggest that increased diversity leads to a ‘diversification of inequality’. This is characterised by an increasing incidence of inequality through the growth in migration and of the size and variety of ethnic minorities, and by a weakening of specific inequalities. We demonstrate this using the Labour Force Survey and conclude that there is a clear diversification of inequality but also that ethnicity is a more potent source of inequality than gender. Diversity also increases the reach of inequality through producing and increasing the number of intersections.

Brynin M., Longhi S., Zwysen W. (2019) The Diversification of Inequality, British Journal of Sociology, 70(1): 70-89.

A Longitudinal Analysis of Ethnic Unemployment Differentials in the UK

As in many developed countries, in the UK the unemployment rate of ethnic minorities is higher than the unemployment rate of the white British majority. These differences may be due to a higher probability of ethnic minorities entering unemployment by losing a job, or to a lower probability of exiting unemployment by finding a job. Using Understanding Society, the UK Household Longitudinal Study, this paper analyses what individual and job characteristics contribute to job loss, what contribute to job finding, and to what extent ethnic unemployment differentials can be explained by such characteristics.

For both men and women the results show no relevant ethnic differences in the probability to transition from a paid job into unemployment. Only Indian UK born women seem more likely to transition than white British majority women, while for other groups the small differences are in favour of ethnic minorities. Segregation in occupations characterised by low wages and less stable jobs does not seem to contribute to the higher unemployment rate of ethnic minorities. The main determinant of ethnic unemployment differentials seems to be the longer duration of unemployment for ethnic minorities, which, however, remains largely unexplained after the inclusion of individual and household characteristics.

Longhi S. (2020) A Longitudinal Analysis of Ethnic Unemployment Differentials in the UK, Journal of Ethnic and Migration Studies, 46(5): 879-892.

Couples’ Response to Job Loss: Boom and Recession Compared

We examine whether couples in the UK increase labour supply to cushion the fall in earnings from a job loss, comparing periods of growth and recession. We consider both male and female earners and various dimensions of labour supply adjustment. We find evidence of labour supply reactions, but they can be negative as well as positive, particularly at the extensive margin. During the recession, household reactions are either unchanged or couples increase their labour market attachment, with bigger positive reactions and smaller negative ones. People do not react in advance of job losses, suggesting that unemployment is a surprise.

Bryan M., Longhi S. (2018) Couples’ Response to Job Loss: Boom and Recession Compared, The Manchester School, 86(3) 333-357.

Employment and Earning Differences in the Early Career of Ethnic Minority British Graduates

Ethnic minorities in the U.K. are more likely than the white majority to gain university qualifications, but experience worse labour market outcomes on average. This paper compares employment and earnings of British graduates from ethnic minorities to those of white British graduates to analyse whether ethnic labour market differences exist among the highly qualified, and whether they can be explained by differences in parental background, local area characteristics or differences in university careers. These factors account for a substantial part of persistent ethnic differences in earnings, but explain very little of the differences in employment. Compared to the literature estimating ethnic labour market inequalities on people with any level of qualification, we find smaller ethnic differences in employment and almost no differences in earnings among graduates entering the labour market. The results are robust to various changes in model specification.

Zwysen W., Longhi S. (2018) Employment and Earning Differences in the Early Career of Ethnic Minority British Graduates: the Importance of University Career, Parental Background and Area Characteristics, Journal of Ethnic and Migration Studies, 44(1) 154-172.

Racial Wage Differentials in Developed Countries

In many developed countries, racial and ethnic minorities are paid, on average, less than the native white majority. While racial wage differentials are partly the result of immigration, they also persist for racial minorities of second and further generations. Eliminating racial wage differentials and promoting equal opportunities among citizens with different racial backgrounds is an important social policy goal since inequalities resulting from differences in opportunities lead to a waste of talent and of resources.

Since minority groups segregate in poorly paid occupations and lack career progression, we may have racial wage differentials even in the absence of direct wage discrimination.  Policy should be based on a better understanding of what characteristics and situations prevent racial minorities from moving into better jobs; discrimination and unconscious bias within and outside the workplace may be part of the reason.

Longhi S. (2020) Racial Wage Differentials in Developed Countries, IZA World of Labor, 2020: 365.v2

Here you can listen to the related IZA World of Labor Blog.  Racial wage differentials in developed countries: Simonetta Longhi in discussion with Dan Hamermesh.