Temporary exit from employment: A response

Towards a more flexible life course

The Authors (Alfageme, Pastor and Viñado, this issue) make a good case for a more flexible life course. They build on the work of earlier writers who argued for ending the tripartite system of education, employment and institutionalized retirement. Enabling periods out of employment at chosen times, with an income sufficient to live on, both decommodifies and defamilizes individuals: it liberates them from dependence on employers and family members. In particular, a real choice about the timing and manner of retirement at some time in later life would be welcome to older people. So the Authors’ aims are admirable. However, the funding mechanism – using state pension entitlements to pay for periods out of employment – seems both unworkable and unfair.

Funding periods out of employment

Using up some or most of the state pension to fund temporary exit periods would have differential effects according to how much other income individuals have to replace the loss. The Authors place a justifiable emphasis on the value of choice as to when to work and when to retire. But they seem to ignore that lack of state pensions would exacerbate inequality of choice in later life. This despite the plentiful literature on how choice as to retirement timing varies with occupational class and type of employer (McNair, 2006; Vickerstaff, 2006). For example, a professional with good health, a satisfying job and an independent source of income has a genuine choice – whether to continue working or to retire and enjoy other activities. But at the opposite end of the social scale, a manual worker in poor health at 60 would face the likelihood of grinding labour until s/he dies or retirement on a very low income. Well-being when not employed is linked to individuals’ control over their work status, an adequate alternative income, and the freedom to find a balance between paid work and other activities that meets their social-psychological needs and fits with their family circumstances (Ginn and Fast, 2004; Warr et al., 2004). For these reasons, a realistic choice about the timing and manner of retirement is important. While a fixed retirement age tends to legitimize ageism among employers, excluding older individuals from employment and consigning them to structured dependency (Walker, 1980), it is equally detrimental to all parties if workers are compelled to work longer to avoid penury. Yet the Authors’ proposal – that future state pension entitlements be partly or wholly forgone to pay for career breaks – would put many older workers in this situation. We should avoid conflating the separate concepts of retirement age and pensionable age. Walker writes: ‘The retirement age acts as an arbitrary cut-off point, which distinguishes the socially and economically useful from the dependent, and is imposed on older workers by institutional or customary practice, regardless of their abilities’ (Walker, 1980: 67). Nowhere does he suggest that workers have no need for a state pension sufficient to live on. The Authors say that all can work on until their health fails, when they will become entitled to disability benefits. But this route is fraught with obstacles, as claimants who feel unable to work confront government agencies aiming to limit disability benefits through increasingly stringent tests of work capacity. Another source of alternative income is private pensions, but these are notoriously maldistributed, severely penalizing those with low lifetime earnings, mainly women and other carers, but also ethnic minorities and the unskilled. These vulnerable groups will be left to claim stigmatized means-tested benefits, hardly a way to enhance autonomy and well-being. To illustrate this point I focus on one of the vulnerable groups (women) using British research to illustrate their disadvantage in the labour market and in acquisition of private pensions.

Gender inequality in private pensions

In terms of funding women’s career breaks, there has been progress in European Union (EU) and national legislation. British mothers benefit from long Maternity Leave and Maternity Pay and Child Benefit; these go some way to fund their periods out of employment. Importantly, their state pension entitlements are protected during career breaks to care for children or others in need. Thus the proposal to fund career breaks by state pension sacrifice would deprive women of hard-won entitlement to a carer-friendly state pension scheme that, although at a relatively low level, will soon provide equal amounts to men and women.

Despite legislation for equal treatment in employment, the gender division of labour persists, in varying degrees, in all EU countries. The majority of women take early breaks for childcare and some also take later breaks or reduce their hours of employment to provide informal care for older relatives. Among older British women who raised a family, full-time employment – crucial for building private pension rights – is much shorter than men’s (Ginn and Arber, 1996). Women born between 1925 and 1940 had by age 65 spent 55 per cent of their 40-year working life in paid employment but only 35 per cent full time (Sefton et al., 2011). The gender difference was strongly associated with motherhood; the minority of women who remained childless and never married had employment histories closer to men’s (Sefton et al., 2011).

The pattern of employment for younger British women has been relatively stable over time in terms of shorter years employed and a lower share that is full time, compared with men’s. Longitudinal research shows that the employment rate of 30 year old mothers with a child under 5 rose to 58 per cent in the 1970 birth cohort compared with 35 per cent in the 1958 cohort. However, for mothers of school-age children there has been no change, nor a shift towards full-time employment (Woods et al., 2003). Full-time employment, earnings and private pension contributions are dramatically reduced by motherhood at all levels of education (Ginn and Arber, 2002). The gender gap in hourly pay is narrowing, but rather slowly. As a proportion of men’s median full-time hourly pay, women full-timers receive 81 per cent and part-timers only 52 per cent (Pike, 2011). Women are, of course, diverse. Well-qualified women in professional and managerial jobs are advantaged relative to other women, with higher pay and a greater likelihood of building a good occupational pension. But even this ‘privileged pole’ of working-age women had less accumulated private pension wealth than that of male manual workers (Warren, 2003). Overall, working-age men’s estimated median pension wealth is £20,000, compared with women’s £10,000 and among women aged over 35, nearly half have accumulated no pension wealth at all (ONS, 2009). Only 43 per cent of older women in 2001 received any private pension (including widows’ pensions), compared with 71 per cent of men; and women’s median private pension income, for those with a pension, was 53 per cent of men’s. Consequently, the total median personal income of British women aged over 65 was only 57 per cent of men’s (Arber and Ginn, 2004) and women were far more likely than men to need a means-tested top-up, 20 per cent of single and widowed women compared with 13 and 11 per cent of equivalent men, and 40 per cent of divorced or separated women compared with 23 per cent of equivalent men (Arber and Ginn, 2004).

Women in their 60s are more likely than similar men to provide eldercare, limiting their earning power. They also face gendered age discrimination and have higher rates of disability than men in each older age group, both of these impairing their ability to earn an income in later years.

Ethnic minority groups also tend to have shorter employment, lower pay and less private pension than white individuals (Ginn and Arber, 2000, 2001) and loss of state pensions would tend to reinforce this disadvantage. Gender and specific ethnicity interact, with Pakistani and Bangladeshi women the most disadvantaged of all in employment and private pensions (Ginn and Arber, 2000, 2001). Only state pensions provide some support and compensation for the financial losses women bear due to family caring roles. Funding temporary exit by using state pensions would remove or reduce this support, further widening the gender, class and ethnic gaps in later life income and hence inequality in choice as to retirement timing.

Flexibility in the life course is a laudable aim, but careful thought is needed if temporary breaks are not to reinforce socially-created disadvantage for certain population groups. An alternative that has been thoroughly researched and costed by academics across the world is the Citizen’s (or Basic) Income. Sadly, this is not mentioned, let alone considered on its merits, by the Authors.

Citizen’s Income – a better alternative

A Citizen’s Income is an unconditional subsistence income paid automatically for each legally-resident man, woman and child as a right of citizenship. The amount enables each individual to live modestly without employment – taking ‘sabbaticals’ for study, travel, voluntary work, to achieve a work–life balance and to reduce stress – or to obtain a higher income through employment. A smaller, or partial, CI would have similar effects, but would need to be topped up by wages for a subsistence income to be achieved. Such wages would not reduce the CI, so each extra £1 (euro or dollar) earned would translate into more additional net income, in contrast to the current system of means-tested benefits that create poverty traps. Since CI is lifelong, it replaces not only state pensions but most other state benefits. CI is simple to operate and to receive, avoiding the current benefit traps that act as disincentives to work (van Parijs, 1992; Fitzpatrick, 1999).

A progressive income tax can ensure that the system as a whole redistributes from rich to poor. Various CI schemes have been costed and the Citizen’s Income Trust has shown that a CI could redistribute somewhat from rich to poor and at the same time would not cost additional government revenue (Widerquist, 2005). A variety of countries have a Citizen’s Pension for older people. For all ages, Iran has a household-based universal unconditional benefit (for the time being), while Namibia and India have implemented pilot projects and Alaskans receive an annual citizen’s dividend.

Conclusions

An income for survival during temporary exits from employment needs to be achieved without reinforcing gender and class inequalities in the labour market and in later life welfare. The Authors’ proposal fails this test as it would deprive vulnerable groups of the security of a state pension, magnifying the differential life chances and autonomy of those with and without alternative sources of income such as private pensions. It would turn the clock back to a time when state pension entitlements were not protected during periods out of the labour market due to family caring, sickness or unemployment. It would represent a savage cut in the redistributive welfare entitlements for which workers have fought hard. Young adults cannot know what their future holds, in terms of financial responsibilities, earning and pension-building capacity, their own health and that of family members. A tax-funded, unconditional Citizen’s Income would provide lifelong security at a basic level, allowing individuals real choices as to priorities – to earn more and give up their time, or to maximize time and live on less – but without the threat of penury and indignity in their later life.