The notion that there is some abstract entity called the economy, which is distinct from the welfare of the people who live in it, is a crude materialistic fallacy. In the first of a two part commentary on the debate surrounding retirement, John draws parallels between Britannia Farm and the employment of older people.
Last week, Britain’s National Audit Office issued a disturbing report on the employment of older people. The Office estimates that their failure to work costs Britain’s economy between £19bn ($34bn) and £31bn a year. Most of the cost is lost output but the report also draws attention to reduced taxes and increased welfare payments.
The proportion of older people in Britain in jobs is below that of the US, but higher than in most other west European countries. In France, only one person in six aged between 60 and 64 is still working, but in the US that is true of those between 70 and 74. President Jacques Chirac is almost the only Frenchman in this age group who still has a job; and there are those who say that, with impending corruption charges, he holds to it tenaciously because if he were to leave the Elysee Palace, it might be to a much less agreeable residence.
These differences cause policymakers increasing concern. Alan Johnson, Britain’s new secretary of state for work and pensions, has a target to raise the proportion of older people working. The European Union’s Lisbon Agenda has getting the elderly back to work as one of its goals for improving the competitiveness of the European economy.
But there is something odd about the way this debate is framed. If the NAO was an accountancy firm reporting on the state of Britannia Farm, the language it uses might seem appropriate, if a little harsh. Putting old workhorses out to pasture is costly to Farmer Brown. Not only does he lose their output, he must also go on feeding and watering them. Even then, however, there seems to be an element of double counting. Working horses must also be fed, and it is reasonable to count the cost of the policy by either measuring the lost output or the unproductive expenditure on food, but not both. Still, the economy would surely be better off if we were less sentimental, and kept our horses in harness until they were ready for the knacker’s yard.
Fortunately we are not living on Britannia Farm. Or if we are, it is – as in George Orwell’s dream, or nightmare – an establishment that is run for the benefit of the animals, rather than the profit of the farmer. The notion that there is some abstract entity called the economy, which is distinct from the welfare of the people who live in it, is a crude materialistic fallacy. Gross domestic product is not an end in itself and the government budget is not a profit and loss account.
The relevant calculus is quite different. If people who want to work are unable to do so – regardless of age – that damages their self respect, undermines their connection to society and imposes a financial burden on the rest of the population. These consequences justify acute concern about youth unemployment. But the position of the elderly is different. Nearly 3m people in Britain over 60 have stopped working before they have reached their official retirement age. Half of them receive invalidity benefit. A similar trend is evident across the whole of western Europe, where sickness and disability benefits for older people have been the fastest growing item in the welfare budget.
And not because of an upsurge in illness: older people have never been healthier. Quasi-retirement through the medical certification of disability is the principal means by which people who have given up work and are too young to qualify for a state pension can nevertheless receive social benefit. This is a theme that I shall return to in next week’s column. Some older people really want to go on working, but only a minority. Others will continue to work if the alternatives are made sufficiently unpalatable. When people talk in the abstract of incentives to work, that is what they mean.
Britannia Farm could certainly produce more if its labourers toiled longer in the fields, its hens were forced to lay more eggs, its superannuated horses boiled down for glue. But economic growth is a means of giving choices to a population, not something to be pursued for its own sake. The active population gains from a more competitive economy but those whose skills are limited or made less relevant by changing technology are disadvantaged. The real economic and social issue is how to achieve a fair and sustainable distribution of the benefits between these groups. It is not just in agriculture that a healthy environment is preferable to intensive farming.