by Serban V.C. Enache
Women Against State Pension Inequality are a UK-based campaign group that “fights the injustice done to all women born in the 1950s affected by the changes to the State Pension Law (1995/2011 Acts).” The 1995 Conservative Government Pension Act included plans to increase the state pension age of women to 65, the same as men’s. The WASPI campaign agrees with equalization, but does not agree with the “unfair way the changes were implemented – with little or no personal notice, faster than promised (2011 Pension Act), and no time to make alternative plans.” The group does not ask for the pension age to revert back to age 60.
Changes to the state pension affected more than a million women, leading to billions of pounds in unnecessary financial savings for the Treasury every year, and causing dramatic rises in poverty rates. The pension reforms pushed women to work into their sixties, eliminating 294 pounds per month of benefits. Calling it administrative incompetence is an understatement. These changes were driven by the insane goal to ‘rein in’ a deficit in fiat (numbers on a sovereign balance sheet) – not a deficit in land, manpower, skills, technology level, or materials.
A report by the Institute for Fiscal Studies found that the move to increase the eligibility age for women from 60 to 63 meant income poverty rates were “pushed up substantially” from around 15 to 20 percent. IFS senior researcher Jonathan Cribb said, “The tax and benefit system is much more generous to those above the state pension age than those below it. So while increasing the state pension age is a coherent response to the public finance challenge posed by rising longevity, it does place a further pressure on household budgets.”
Mr. Cribb is wrong on two accounts. Social Security is not a challenge in financial terms, irrespective of demographics. Increasing the state pension age is not coherent policy. But we’ll get to that in a minute. As a result of this aberrant reform, employment increased for women between the ages of 60 and 62, leaving them about 32 pounds a week worse off in net terms. As you might expect, poorer individuals were hit proportionally harder. The income poverty rate of women aged 60 to 62 (now under the state pension age) increased by over 6 percent.
The Government made needless economies, some 5 billion pounds a year between 2010 and 2016 by paying less in (earned) benefits to some 1.1 million women, and obtaining higher revenue from the same women who continued to work and pay taxes. The Women Against State Pension Inequality (WASPI) campaign accused ministers of not considering the full impact of the reforms. If things maintain their present course, by the time the state pension age reaches 68, about 7.6 million people will stand to lose – and the loss is estimated at around 10.000 pounds per individual.
The 1995 Pensions Act first set out how the female state pension age would be increased from 60 to 65 from 2010, until it would be equal with the male age at 65 by 2020. The current Government is planning further increases, aiming to reach 67 between 2026 and 2028. More people are in employment than ever before, including a record 9.9 million older workers, if we are to believe the official figures. The problem lies with how unemployment is defined. Individuals who are taking time off, or have given up looking for work, or those that work at home to look after their family members are not counted as part of the workforce. If the UK was close to full employment, wages would be going up. In truth, over 21 percent of British workers are either officially unemployed, employed part time (desiring full time work), or inactive.
Now we return to the question of why increasing the state pension age is not coherent policy. Gains in productivity through time ought to translate into lower retirement ages, not higher ones – and the population’s behavioral patterns ought to shift from consumerism to leisure. In other words, we need sustainable (eco-friendly) consumption patterns, and less stress. Stress doesn’t impact just our relationships with other humans and our peace of mind, it actually triggers negative chemical reactions in our bodies. In the presence of stress, ailments appear and grow. The kind of savings we need to be concerned about are expenditures of real resources and labor on things that could be, more or less, easily avoided. Countries with neutral or negative demographics can enjoy high living standards. It’s all a matter of productivity and distribution of purchasing power.
Since people in government are concerned with achieving financial savings, they are concerned with the wrong thing. They are sacrificing current generations and future generations implicitly by reducing spending on infrastructure development, production of capital goods, cutting off investment in education and health care, and neglecting environmental issues today. Financial savings are financed from debt. In the UK (and indeed in most countries) the biggest institution with negative capital is the Treasury. Who holds the corresponding positive capital? The non-government sector, which is composed of the domestic private sector (domestic firms and households) and the foreign sector (foreign firms, foreign households, and foreign governments).
With the correct premise in mind, coherent pension age policy is to slowly bring it down from pre 1995/2011 levels, for both men and women. Instead of having people work longer through various coercive schemes, the government should give labor incentives – and the best incentive I know of is being able to keep 100 percent of what you earn.
Who will finance Social Security, Health Care, Education et all? The real economy, if the Government allows it to function for this purpose. All that’s required is the political will to approve proper budgets for these institutions to serve their mandate accordingly. There’s no need to target a specific deficit or debt to GDP ratio.
Changes in legislation which dramatically impact people’s livelihoods and ability to plan for the future shouldn’t arrive before the officially announced date. Laws ultimately come down to technicalities, and any ambiguity in a contract benefits the party that did not draft it. In this case, the state is wrong and the WASPI campaign is in the right.
Serban V.C. Enache is a Romanian journalist and indie author. Though interested in history, politics, and economics, his true passion is for medieval fantasy fiction. https://www.amazon.com/Serban-Valentin-Constantin-Enache/e/B00N2SJD6O/