How Does Increasing the Early Retirement Age for Women Affect the Labour Supply of Women and Their Husbands?

41 Pages Posted: 20 Mar 2014

See all articles by Jonathan Cribb

Jonathan Cribb

University College London

Carl Emmerson

Institute for Fiscal Studies (IFS)

Gemma Tetlow

Institute for Fiscal Studies (IFS)

Date Written: January 31, 2014

Abstract

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. This implies the early retirement age explained almost all excess retirements at age 60 before 2010. 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.

Keywords: Early retirement age, labour supply, policy reform, retirement

JEL Classification: H55, J21, J26

Suggested Citation

Cribb, Jonathan and Emmerson, Carl and Tetlow, Gemma, How Does Increasing the Early Retirement Age for Women Affect the Labour Supply of Women and Their Husbands? (January 31, 2014). Netspar Discussion Paper No. 01/2014-003. Available at SSRN: https://ssrn.com/abstract=2411433 or http://dx.doi.org/10.2139/ssrn.2411433

Jonathan Cribb (Contact Author)

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

Carl Emmerson

Institute for Fiscal Studies (IFS) ( email )

London, WC1E 7AE
United Kingdom
020 7291 4800 (Phone)
020 7323 4780 (Fax)

Gemma Tetlow

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

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