2004 - Retirement ages and pensions
It is a pity that the work and
pensions debate, enlivened in the UK last week
by the publication of Adair Turner's first report
in his role as chairman of the Pensions Commission,
should be focused so heavily on saving for retirement.
The idea of funding our later
years by working longer is dismissed far too pessimistically
in "work until you drop" stories that
assume that retirement is some kind of leisure-packed
ideal to which we must all aspire. Such assumptions
ignore a continuing urge to contribute to society
and the associated feelings of rejection among
many of the recently retired.
When Charles Booth, the Victorian
shipping magnate, concluded in his momentous study,Life
and Labour of the People in London, published
in 1903, that much of the existing poverty 100
years ago was created by old age, the common practice
of the time was to send the ageing poor to work
The link between work and compulsion
remains a source of fear when the debate should
really be focused on extending access to the workplace
with a variable range of involvement for those
who might seek to lengthen their working lives.
Booth envisioned a time when the elderly "can
still remain members of the society to which they
are accustomed". His sentiments hold good
People of all ages need to maintain
their membership of society and that should include
an economic contribution, where possible. Now
that improving health is extending the working
capacity of many far beyond the state pension
age of 65 (for men), there is a growing need for
longer careers or second careers offering opportunities
for the over 50s to enjoy a richer, more varied,
and more significant involvement in working life.
Studies in Sweden and the US
suggest, as the Pensions Commission report noted,
that "for many people increasing life expectancy
is associated with an increase in the number of
years of healthy active life".
Yet most employers remain focused
on the younger workforce. This should not be surprising
because the practice of too many companies in
the past few years has been to use surpluses in
their pension schemes to shed their older workers
through early retirement. The widespread decline
in surpluses has curbed these practices - bad
news for those seeking to go early but good news
for those who want to work to their contractual
But should we have age limits at all? The UK's
educational grants system has a cut-off age of
55 on the assumption that study beyond this age
can have no possible economic benefit for society.
That is nonsense.
A retirement age of 65 is itself artificial, the
result of western economies and private pension
schemes following the precedent established by
Germany, the first country to establish a state
pension system. Introduced in 1889, it was based
on a retirement age of 70, reduced to 65 in 1916.
Age limits have lost their relevance as life expectancy
has risen. In the UK in 1950 retiring workers
could expect to spend 18 per cent of their adult
lives in retirement. Today that proportion has
risen to just over 30 per cent. Such inactivity
is not only economically unsustainable, it is
no longer acceptable from a moral and cultural
It is not limits that we need, but better ways
to make use of all the experience that goes to
waste when people retire early. The answer has
to go beyond lengthening job tenures. The idea
that people should simply continue working the
same way through a lifetime lacks imagination.
In fact there is growing evidence that the productivity
benefits of work differ with age. David Willetts,
the shadow secretary for work and pensions, speaking
at a conference in London last week organised
by the Third Age Employment Network, pointed to
a study in the US that compared the relative success
of the artists Picasso and Cezanne.
The study, carried out by David Galenson, professor
of economics at the University of Chicago, compared
historical references and auction house prices
for the work of each artist to gauge the most
successful periods of their careers.
Picasso's best work, it appears,
was produced in his mid to late 20s whereas Cezanneproduced
his most important work around the age of 66.
Prof Galenson notes that both artists had contrasting
approaches to their work. Cezanne viewed his work
as a series of experiments. Once one painting
was completed, he was eager to move on to the
next. Picasso, on the other hand, treated each
of his completed works as an achievement in its
In a related study looking at
other artists, Prof Galenson concluded that where
conceptual innovation was considered important,
artists produced their best work early in their
careers. But great art that relied on experimentation
and craftwork tended to be produced later in a
More recently, in a study co-authored
with Bruce Weinberg of Ohio State University,
Prof Galenson has found the same features when
comparing the work of leading economists.* Those
with innovative ideas tended to introduce their
concepts early. But those who derived their ideas
from a body of evidence tended to do so later
in their careers.
"Although some academics
appear to believe that creativity is exclusively
associated with youth, others understand that
there are two different cycles of creativity,"
The findings could have a bearing
on workplace organisation since they suggest that
the nature of productivity differs between age
groups. Where in the past the focus has been on
crude measures of output, there needs to be a
better understanding of the ways that people approach
work at different stages of their careers. New
ways of rewarding and recognising people may be
needed to reflect these differences.
Mr Willetts notes that retirement
ages have traditionally been related to a labour
market where people expect higher pay as careers
progress. A retreat from service-level increments
over a lifetime career, he believes, will weaken
the case for conventional retirement ages.
The "up and out" progression
of careers does not seem to make much sense any
more if it results in the premature end to a promising
career. Employers need to explore ways of retaining
expertise that could envision stepping down from
a higher-paid to a lower-paid responsibility or
allow various deviations from the full-time salaried
model. At the same time employees need more transparent
and, possibly, individual ways of building their
retirement benefits so they can extend their independence.
It may be that, ultimately, market
forces will be strong enough to shape the kind
of transitions throughout our working lives that
will allow people to provide for their futures.
Balancing the needs and demands of an ageing workforce
will not be easy but the urge to dabble too heavily
in regulated social engineering should be resisted.
as a pdf file