The Elderly
Self Supporting?

Those aged 65 and over now represent almost 15 per cent of the population and this proportion has trebled in the last century. At the same time the number of elderly people in work and earning a living has declined sharply. In 1881 three out of every four men aged 65 and over were in some form of employment; by 1981 the ratio had fallen to one in ten. Since the introduction of state old-age pensions in 1908, the majority of retirees have been supported by the state. The increasing cost of this financial support has recently prompted concern.

There are two obvious ways of reducing the financial burden of state old-age pensions. The first is to encourage the old to provide for themselves through increased saving during their working life; the second to encourage more elderly people to stay at work. Is it realistic to expect the elderly to provide for themselves in these ways? In Discussion Paper No. 47, Research Fellow Paul Johnson explores this question from a longer-run perspective, examining historical trends in the labour force participation of the elderly and in their patterns of asset accumulation.

The economic theory of life-cycle savings suggests that individuals plan for the decline in income in old age by saving earlier in their life. Johnson argues that the life-cycle theory may explain current UK savings behaviour, but is less appropriate as a description of earlier periods, when incomes were lower and welfare provisions less generous. Recurrent periods of indebtedness and poverty during the last century have prevented sustained capital accumulation by most working class families. Economic growth this century has not eliminated the possibility of reaching the end of a working life with no accumulated capital. Johnson notes that today, as in Edwardian times, the majority of the elderly in Britain live on or near the margins of poverty. Efforts to encourage asset accumulation before retirement in order to provide for old age cannot be expected to have an appreciable impact on the large number of households for whom retirement is synonymous with poverty.

This lack of accumulated assets is one reason why some elderly people attempt to remain in employment. The proportion of the elderly population in work has fallen consistently over the last century. Johnson finds evidence in the decennial censuses that the nature of old-age employment has nevertheless remained remarkably stable over time. Traditionally the elderly have been employed in low-wage, low-status occupations such as agriculture and labouring. They have found employment more recently in sales and clerical work, which require less skill and have fallen in status in the last fifty years. These long-established employment and retirement patterns for the elderly appear to have deep roots in the history of the UK labour market. There seems little scope, according to Johnson, for increasing the financial independence of old people through increased employment, particularly as the less-skilled jobs the elderly traditionally filled are now rapidly declining in number. Johnson concludes that any attempt by the government to increase the economic self- sufficiency of the elderly through more employment is therefore likely to be unsuccessful, at least in the short run.

The state will need to provide more financial assistance to the elderly in the future, Johnson argues, because most elderly individuals and households have neither the ability nor the opportunity to provide for themselves.


The Economics of Old Age in Britain: A Long-Run View 1881-1981
Paul Johnson

Discussion Paper No. 47, February 1985 (HR)