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Small employers employ significant fractions of the workforce, but their employees typically have very low pension plan participation rates and so are much more likely to be affected by government ...

There have been dramatic changes in the patterns of work among people in their 50s and 60s over the last 50 years. The gradual increases in employment since the mid-1990s are generally welcome. A longer working life boosts household incomes, as people are reliant on their wages and salaries for longer (as opposed to state benefits), they have longer to accumulate private pension wealth, and fewer years in retirement to draw upon their private pension resources. There have been changes not only in the number of people in work, but also in the types of work they have been undertaking, with particularly large rises in full-time work for women. This report brings together new evidence on these issues to examine the recent trends in, and prospects for, the labour market for people in their 50s and 60s. We draw upon evidence from a two-year programme of work conducted in partnership between the Institute for Fiscal Studies and the Centre for Ageing Better whose key aim has been to understand better the changing patterns of work for older workers. But we also bring new evidence from analysis of recent microdata on labour market outcomes and expectations to help provide an assessment of the situation facing older workers in coming years.

This report examines how material living standards - most commonly measured by households' incomes - have changed for different groups in the UK, and the consequences that these changes have for income inequality and for measures of deprivation and poverty. This is the 22nd annual report published by IFS authors on living standards, poverty and inequality in the UK since the annual reports started in 2001. In this report, we focus on two particular issues. First, we look at how the distribution of household income changed during the first year of the COVID-19 pandemic. Second, we use pre-pandemic data on child poverty and material deprivation to examine the situation facing poor families with children prior to the pandemic.

This report examines how household incomes were changing in the UK up to the eve of the COVID-19 pandemic, and how other measures of household living standards have changed over the course of the pandemic. In particular, we use the latest official data covering years up to 2019-20 to provide a comprehensive picture of UK household incomes before the pandemic hit. We subsequently use more recent data to examine how the pandemic and associated restrictions on economic activity have radically affected the scope for people to earn an income in the labour market, and what the implications of the pandemic have been for measures of household deprivation. We look at how different groups have fared, with a focus on low-income households, both before and during the pandemic.

We examine the effect of obliging employers to enrol employees automatically into a workplace pension scheme. We exploit the phased roll-out of automatic enrolment, by employer size, in the first country to do so nationwide (the UK), to estimate its effect on pension saving among private sector employees. We find substantial increases in pension participation and a rise in pension saving. Surprisingly, many newly enrolled employees received an employer contribution substantially above the (very low) minimum default level. Automatic enrolment also caused the pension participation of those employees who were not obliged to be automatically enrolled to more than double.

Longer working lives offer many benefits, but achieving these can pose challenges for individuals, employers and policymakers. In order to support people in their 50s and 60sto remain in paid work for longer, it is imperative that we have a good picture of what paid work looks like at older ages, and how that might evolve in future. The desired working patterns of older workers-in terms of their hours of work, the form of their employment or the tasks they undertake at work -may be quite different from those of middle-aged or younger adults. An ageing population and higher employment rates for people in their 50s and 60s mean that patterns of work of older workers are an increasingly important issue for the country as a whole. Indeed, in 2019, around 10millionor 61% of 50-to 69-year-olds were in paid work, meaning that this age group comprises almost a third (31%) of the workforce in the UK, up from just 21%in 1992. In this report, we provide fresh evidence on the nature of paid work at older ages, how employment patterns differ for people in different circumstances and how the situation is changing over time. In particular, we examine in depth the transitions that older workersmake, both intoand out of work and between different types of employment in the run-up to retirement.

Recent years have seen increasing concerns in many developed countries over 'the changing nature of work'. For example, in the United Kingdom, the Taylor Review notes that only 60% of workers are permanent employees. In the United States, a recent review by Mas and Pallais (2020) found that alternative working arrangements such as solo self-employment, zero hours contracts, agency work, independent contractors, and jobs in the gig economy are now more prevalent than 'traditional' jobs. The rising numbers of the self-employed are one of the drivers of these changes. Data from the Bank of England (2018) and the Office for National Statistics (2018a, b) suggest that in recent years the proportion of the UK workforce working for their own business reached its highest level since at least 1854. As shown in Figure 1.1, in the past 20 years the proportion has increased by 3 ppt. With an increasing employment rate and growing population over this period, the numbers of individuals who declare that they are working for their own business as their main economic activity has increased substantially from 3.2 million in 2000 Q2 to 4.8 million in 2018 Q2.

We estimate the impact of increasing the female early retirement age (ERA) on household living standards. Examining the increase in the female ERA from 60 to 63 in the UK, we find increased earnings only partially offset lost public pension income, leaving affected women's household incomes £32 per week lower on average. The proportional effect was substantially larger for women in lower income households. This increased the income poverty rate among affected women by 6.4 percentage points. We find no evidence of an increased inability to afford important material items, potentially suggesting that material deprivation has been avoided through smoothing of consumption.

We study earnings and income inequality in Britain over the past two decades, including the period of relatively 'inclusive' growth from 1997 to 2004, and the Great Recession. We focus on the middle 90%, where trends have contrasted strongly with the 'new inequality' at the very top. Household earnings inequality has risen, driven by male earnings-although a 'catch-up' of female earnings did hold down individual earnings inequality and reduce within-household inequality. Nevertheless, net household income inequality fell due to deliberate increases in redistribution, the tax and transfer system's insurance role during the Great Recession, falling household worklessness, and rising pensioner incomes.

Whether the UK leaves the European Union, and if so on what terms, is a crucial issue and therefore rightly should be the subject of much debate in the run-up to the general election on 12 December. But Brexit is not the only economically important decision that the UK faces. So the general election debate should not be only about Brexit. With this in mind, this report sets out one page on each of the following six economic areas where attention, and action, by policymakers are needed. Serious parties seeking election should be setting out how they would seek to address these serious challenges. - productivity performance and average earnings (page 3); - living standards of different generations (page 4); - in-work poverty (page 5); - pressures on pensions, health and social care spending (page 6); - weaknesses in the tax system (page 7); and - getting to net zero greenhouse gas emissions (page 8).

Business owners have been the fastest-growing part of the UK labour force since at least 2000. Between 2000-01 and 2015-16, the number of employees grew by 15%, while selfemployment (including those operating as a sole trader or as a partner in a partnership) grew by 25% and the number of directors of companies with at most two directors more than doubled. The number of new businesses created in the UK between 2007-08 and 2015-16 was higher than in any other OECD country. This is an important labour market trend and is often hailed as a success because small businesses and start-ups are commonly viewed as the engines of growth. This is questionable in light of evidence that the UK has a long tail of low-productivity firms. However, to date, our understanding of business owners has been limited because they are not well captured in traditional survey data sources. Learning more about this group is crucial for understanding labour market trends better and informing public policy as it relates to business owners. In this report, we use the universe of business owners' administrative tax records provided by HM Revenue and Customs (HMRC) to learn more about business owners and their businesses than has previously been possible using survey data. Specifically, using these data, this report documents the numbers, characteristics, incomes and business activities of business owner-managers in the UK. We track the same business owners over time - something that has not been possible before - and use this to analyse patterns of business start-up and closure and to explain substantial falls in sole trader incomes since 2008.

This report examines how living standards - most commonly measured by households' incomes - have changed for different groups in the UK, and the consequences that these changes have for income inequality and for measures of deprivation and poverty. In this latest report, we focus in particular on those people who are poorest in society, with two of our three main chapters focusing on poverty.

We examine the reason for the increased in-work relative poverty rate in Britain over the last 25 years, which has risen by almost 5 percentage points from 13% to 18%. We identify two reasons that are actually due to positive trends in British society: the catch up of pensioner incomes (driven by higher state and private pensions), and falls in worklessness bringing low earning types of households (such as lone parents) into work. We show that increases in household earnings inequality since 1994 explain 1.4 percentage points of the rise. The fact that housing costs have risen much more for low income households than for higher income households explains 2.4 percentage points of the rise. Working against this, increases in re-distribution towards low-income working families pushed down relative in-work poverty by 2.1 percentage points. This was due to benefit changes in the early 2000s and between 2007 and 2010 which acted to reduce relative in-work poverty, though this has been partially reversed by reductions to benefit entitlements since 2010.

Existing evidence on the effectiveness of automatic enrolment is focused on large employers. We compare pension savings of employees working for small employers who were pseudo-randomly affected by automatic enrolment with those working for small employers who, at the same moment in time, were not. We find that automatic enrolment substantially increased workplace pension participation among those working for small employers by around 45 percentage points to reach 70% of targeted employees – with most, but not all, brought in at relatively low rates of pension saving. Despite this large increase, this leaves pension participation substantially below the very high levels (around 90%) seen under automatic enrolment among the largest employers in the United Kingdom and the United States. We find evidence that this lower participation rate is not explained either by differences in the observed characteristics of workers between smaller and larger employers, or by differences in the pension contributions offered by employers.

English Abstract: We examine non-standard work and its impact on pension coverage via a case study of the US, the UK, and Germany. We find that the share of workers engaged in non-standard work has changed only modestly over time in these three countries, despite the popular perception that a more significant transformation in the nature of work may be underway. We discuss how non-standard work may affect public pension coverage, as both the pension rules and the level of actual and reported earnings of workers engaged in non-standard work can differ from those of workers engaged in standard work. We find that workers who spent much of their career in self-employment (one type of non-standard work) have higher levels of financial distress in retirement and rely more on financial assets outside the public pension system. German Abstract: Wir untersuchen atypische Beschaftigungsformen und ihre Auswirkung auf den spateren Rentenbezug anhand einer Fallstudie der USA, Grosbritanniens und Deutschlands. Dabei stellen wir fest, dass sich der Anteil der Arbeitnehmer, die einer atypischen Beschaftigung nachgehen, in diesen drei Landern im Lauf der Zeit nur geringfugig verandert hat, trotz der weit verbreiteten Auffassung, dass sich ein tiefgreifenderer Wandel in der Arbeitswelt vollziehe. Wir erortern, wie sich atypische Beschaftigungen auf den Rentenbezug aus der staatlichen Rentenversicherung auswirken kann, da sowohl die Rentenversicherungspflicht als auch die Hohe der tatsachlichen und gemeldeten Verdienste von Arbeitnehmern in atypischen Beschaftigungsverhaltnissen, von denen der Arbeitnehmer in Normalarbeitsverhaltnissen, abweichen konnen. Wir stellen fest, dass Arbeitnehmer, die einen Grosteil ihrer beruflichen Laufbahn in der Selbststandigkeit verbracht haben (definiert als eine Art atypischer Beschaftigung), im Ruhestand in hoherem Mase in finanziellen Noten sind und starker auf finanzielle Vermogenswerte auserhalb des staatlichen Rentensystems angewiesen sind.

We estimate the changing value of workplace pensions in the UK and incorporate their value into an estimate of the public sector pay differential. Falling pension membership in the private sector and growing value of public service pensions led to a significant increase in the estimated public sector pay differential from 1997 to 2009, even though headline pay grew faster in the private sector. From 2009 to 2012, although pay grew faster in the public sector, reforms to public service defined benefit pensions, particularly indexation to the CPI rather than RPI, significantly reduced the public pay differential.

This report examines changes in the distribution of household incomes in the UK, and the determinants and consequences of recent trends. This includes analysing changes not only in average living standards but also in household income inequality and measures of income poverty and deprivation [...]

This paper estimates the effects of entering the labour market when the economy is weak on subsequent living standards using consistent long-running household survey data from the UK. In line with previous research, we find persistent scarring effects on employment and earnings. However, we also provide the first estimates of impacts on net household incomes and household expenditures – standard proxies for material living standards – and we find little or no impacts. This is primarily due to two particular forms of insurance: the UK tax and transfer system and, even more importantly on average, the incomes of parents, with whom many young adults live in the years after leaving education. The interplay between heterogeneity in labour market scarring and insurance is key to understanding why parental incomes insure so much of the shock: lower-educated young adults experience the worst labour market scarring effects, but they are also highly likely to live with their parents in the years after labour market entry (irrespective of economic conditions), and the negative labour market effects are not so persistent as to outlast the typical period of co-residence. However, young adults not living with parents do see negative and persistent scarring effects feed through to their net incomes and expenditures. It may therefore be useful for future research on scarring to focus on this group, as well as the degree to which resources are shared within households between parents and their co-resident adult children. Key findings of the research include: Leaving education when the economy is weak has a direct impact on employment and pay at least five years afterwards. Young adults five years after leaving education are still 1 percentage point less likely to be employed if they started out when the unemployment rate was 10% rather than 6% (unemployment has risen by 4 percentage points on average during the last three recessions). The average negative impact on the pre-tax earnings of young adults and their partners (if they have one) five years after leaving education is 4% – or £1,100 per year. These effects have faded away almost completely after a further five years. Some of the impact is offset by lower taxes and higher benefits. Once you account for taxes and benefits, the effect of leaving education when unemployment is high on the combined incomes of young adults and their partners (if they have one) five years later falls from 4% to 2%. Another important potential safety net is that most people live with their parents in the first few years after leaving education, irrespective of economic conditions. This is particularly important in the years immediately after leaving education, when the effects on employment and pay are the largest: between 2010 and 2015, 74% of young adults lived with their parents a year after leaving education, 54% three years in and 38% five years in. As a result, starting working life during a recession has little impact on the total resources available to the households that young adults live in, on average. Young adults’ net household incomes (including the incomes of all members of their household – most importantly parents) are hit by only 1% five years after leaving education. While there is no guarantee that resources in the household are always shared equally, at the very least this implies that many parents have the capacity to provide an important safety net for their children after they leave education. The safety net provided by parents is particularly significant because lower-educated people are both most affected by starting out in a recession and most likely to live with their parents. Five years after joining the labour market, the pre-tax earnings of young adults and their partners are 4% lower for those who left education at 16 but there is no effect on those who left when they were 19 or older. At the same five-year stage, 60% of those who left education at 16 still live with their parents, compared with 21% of those who left when they were 19 or older. For those young adults not living with parents, there are significant lasting effects on overall incomes and household spending. For this group, starting working life when the economy is weak causes household net incomes and spending to be 2–3% lower even five years later.

It is now around a decade since the financial crisis that triggered the Great Recession of 2008-09. In many respects, the impacts of this recession on the living standards of UK households have been unusually severe. Median household income is now around 15% below its long-run trend, having grown by only around 5% over the past decade. However, one dimension in which the Great Recession has not had a deleterious impact is income inequality. In this report, we seek to understand why past recessions have had such different effects on income inequality. We also examine the potential impact of the next labour market downturn on the distribution of household incomes.

The earliest age at which women can receive a state pension in the UK (the ‘state pension age’) has been increasing since 2010. We use a difference-in-differences methodology, exploiting the gradual increase from age 60 in 2010 to age 63 in 2016, to estimate the impact of the reform on women’s incomes, income poverty rates and measures of material deprivation. We find that, on average, increased earnings partially offset the loss of state pension income, leaving affected women’s household incomes on average £32 per week lower due to the reform. Proportionally, the reduction in household income is larger for lower-income women. These reductions in income lead to the absolute income poverty rate of women aged 60–62, who are now under the state pension age, increasing by 6.4 percentage points. However, the increased risk of poverty does not persist after the point at which they reach the state pension age. Moreover, we find no evidence that increasing the state pension age increases the probability of women reporting being deprived of important material items, at least for the items observed in our data. This potentially suggests that they have smoothed their consumption, and avoided increased levels of material deprivation, despite the large reduction in income caused by the reform. Figure. UK state pension age for women under different legislation Figure. UK state pension age for women under different legislation