Explaining the fall in women’s economic inactivity
The number of women in work rose 10,000 this quarter to 13.5 million. Female unemployment also rose because more women are entering the labour market having previously been inactive.
This makes the increase in women’s unemployment sound like it’s really a good thing, a sign that the labour market is working well, which didn’t sound right. And it isn’t. In fact, the most likely reason for this shift is the gradual rise in women’s state retirement age.
Let’s start off by looking at the data that the government’s claim is based on. Over the past year there has been an increase in the number of women who are unemployed and in the number who are employed whilst at the same time the number who are ‘economically inactive’ has fallen.(*) To make matters more complicated, we have to take into account the fact that the number of working age women is growing:
Once you take rounding into account, the increase in the total number of women in this age group plus the fall in economic inactivity equals the increase in employment plus the increase in unemployment.
The age group is important. It’s difficult to get consistent data for all women over 16 so everyone who looks at these figures has used the results for women aged 16 – 64. These figures are often referred to as the “working age” figures. And, of course, for men 16 – 64 is currently working age. But not for women – women’s state retirement age is currently 61. The key thing to remember for later on is that this age group is made up mainly of women of working age plus some women over retirement age.
The other thing that worried me about the implication that what we have here is a benign movement of women into the labour market was what happened when you look at whether or not the reduction in economic inactivity was among women who wanted jobs. Because the definition of economic inactivity covers everyone who hasn’t got a job and doesn’t meet the tight definition of unemployment, there is a large minority (usually about 2 – 2.5 million people) who say that they want work. If the reduction in inactivity was positive, you’d expect it to be concentrated among that group.
But it isn’t:
So the next stage is to break down the change over last year to more specific categories than in my first table – to each of the different reasons for economic activity that are covered by the Labour Force Survey. These include being a student, being sick, looking after home or family and being retired. For men, that last category is early retirement but for women it includes some early retired but others who are over state retirement age and are therefore retired properly. In the latest figures there are 469,000 men in this group and 1,036,000 women – more than twice as many.
If we calculate what proportion of women aged 16 – 64 was in each of these categories in Nov – Jan 2011 and then apply the same proportions to the population in Nov – Jan 2012 we can see how we would expect the numbers in each to have changed.
There’s several interesting points here. For one thing, the results for the sick and disabled categories suggest that the harsher test for disability benefits may be having an impact. But what jumps out is the difference between the expected 2,000 increase in retired women and the actual 58,000 fall. Not what you’d expect given that we have an ageing population.
What makes sense of this change is the fact that, during 2011, the state retirement age for women was gradually rising – it rose every other month as part of the structured increase in women’s pension age, first to 65 and eventually to 67.
It isn’t that women fancied their chances of getting a job and so “are entering the labour market”. It’s the fact that fewer of them are now over state retirement age; when the Labour Force Survey asks them what they are doing, they reply that they are unemployed or looking after their family or home. Some are probably women whose employers encouraged them to retire when they reached 60.
This would explain why women who didn’t want a job were as likely to have moved from economic inactivity to unemployment as women who did want one.
This is not a positive story at all, it’s a story of women who had to put off retirement because government policy made them do so at precisely the time when the labour market was unable to deliver them a job.
(*) The labour market statistics put everyone in three large groups. There are people in employment and people who are unemployed (these two together are sometimes called the ‘economically active’) and people who are ‘economically inactive’. To be counted as unemployed you have to not have a job, be available for work at fairly short notice and have been looking for a job recently; if you don’t have a job but don’t meet the other criteria you are economically inactive. (By the way, I try not to shorten this to ‘inactive’ – it’s a group that includes lots of people like carers who are very active.)