A new study says policymakers should ensure they consider the bigger picture of decisions to raise the retirement age, including the impact on the health and care sector of the loss of informal care.
The net gain arising from increased employment due to raising the retirement age may be smaller than anticipated because of the impact on those caring for older relatives, according to new research.
The study, Should I care or should I work? The impact of working in older age on intergenerational support, led by Ludovico Carrino from King’s College London, will be presented at the Royal Economic Society (RES) 2021 annual conference this week.
It says the net gain of raising the retirement age may be less than anticipated because of older workers’ reduced ability to provide intergenerational care support for their parents.
The study, based on the experiences of 7,102 women aged 55 to 65 tracked between 2009 and 2018 and on a sample of 1,617 parents aged 70 or older monitored between 2006 and 2017, finds that women in the UK who work more hours due to the increase in their state pension age substantially reduce informal caregiving to older parents, who receive less overall care as a consequence. The reduction in the supply of care for older people is expected to lead to higher unmet need, increasing the demand and costs for health services later in life.
Among women aged 55-65 providing care outside their household, an increase in work-time by 10 hours per week due to postponement of the state pension age leads to a drop in care time of 2.1 hours per week. Moreover, it reduces by 50% and 36% the probability of providing intensive care (20+ hours per week) or meaningful care (5+ hours per week). For someone working 30 hours a week, there is a reduction in caregiving of 330 hours a year, valued at around £5,600 (based on the standard rate of £17 per hour).
Specific groups are more affected by longer working. First, the above effects are twofold among women engaged in jobs characterised by high physical or psychosocial demand. Second, among women with ‘sandwich’ care responsibilities for both grandchildren and parents, the probability of providing any amount of care drops by 30% on average.
Parents who receive less help from their daughter do not receive more help from other family members or formal services as a counterbalance. Therefore, total support for older parents shrinks when their daughters work longer due to postponed retirement.
The researchers say their findings highlight the unanticipated impact of pension policies on overall welfare. They say that informal care represents the largest source of long-term care in OECD countries, with large economic value (over £132 billion in the UK alone in 2015).
Over two million carers in the UK (over 30% of all carers) are aged between 50 and 64 years old, a key age group affected by pension reform. The reduction in the supply of care for older people is expected to lead to higher unmet need, increasing the demand and costs for health services later in life, state the researchers.
They say that their findings show that policies should not be considered in institutional silos and that their overall welfare impact should be considered.
They recommend considering expanding caregiver’s allowances coverage to women affected by increasing the retirement age and a reform of access to formal care services, for example, by relaxing eligibility rules for older people whose primary caregiver was subject to an increase in their State Pension age. And they say workplace interventions could be implemented, by giving incentives to employers to offer flexible work arrangements for women who have caring responsibilities.