Knowledge that Transforms

Unlike most other European countries the United Kingdom's pension system is not well described by an analysis of the social-security element. For 30 years or more, around half the workforce has been covered by private occupational pensions. Something like half of the income of pensioners comes from non-socialsecurity sources, and this proportion is growing. Of the workforce in the mid-1990's, 75 percent are contracted out of the secondtier State Earnings Related Pension Scheme (SERPS) into private occupational or personal pensions.' Partly as a result of these facts the United Kingdom also differs from many other countries in one other important respect: its state pension system is solvent. Tax rates necessary to pay for it are not predicted to rise despite the fact that the number of people over state retirement age is predicted to rise from 15.7 percent of the whole population to over 24 percent in 2050.2 In this paper we begin by describing the labor-market behavior of individuals around pension age. We also consider the coverage of the various parts of the social-security system. We go on to explain the structure of state pensions in the United Kingdom and compute the incentives for retirement that the structure creates, focusing on early retirement and the role of disability benefits, which are especially relevant for lower-skilled workers. We compare these incentives with those facing workers with private occupational schemes who now make up the mnajority of older workers close to retirement. The structure of incentives is found to match well with the observed patterns of labor-market participation in the data. L. The Labor-Market Behavior of Older Persons in the United Kingdom The labor-market behavior of older persons in the United Kingdom has been characterized by a severe fall in the participation of men. The rate of participation among recent cohorts falls sharply below 80 percent after the age of 50 and declines rapidly thereafter. In contrast the secular rise in the participation of women has resulted in a small upward trend in participation among women in the 55-60 age bracket, with participation rates approaching those for men

The U.S. government established a national weather organization in 1870. Changes in Great Lakes cargo and hull losses, and shipping rates from Chicago to Buffalo, provide evidence of the value of storm warnings on the Great Lakes. Nearly half of the Great Lakes storm-warning stations were closed during the fall of 1883 because of appropriations reductions. This exogenous shock permits the econometric estimation of the value of storm-warning locations on the Great Lakes. The results indicate that the social rate of return for weather expenditures during the Weather Bureau's founding period was at least 60 percent. Copyright 1998 by American Economic Association.

Twenty-five years ago, married women's retirement decisions were strongly influenced by their husbands' health and retirement status, factors determining the value of women's nonmarket time. In contrast, their own economic opportunity set (wages, Social Security entitlements, and employer pension benefits) appeared to have little effect on their decisions to leave the labor force.' Married women currently forming expectations regarding retirement differ in important ways from this earlier generation. They have spent more time in the labor force, earned higher wages, and accumulated substantial pension rights, both private and public. They also have lower probabilities of remaining married. In 1970, 82 percent of U.S. women aged 45-54 were manried, while 5 percent were divorced. By 1992, only 73 percent were married, while 16 percent were divorced. Thus, husbands' pension and Social Security benefits are less likely to provide economic security in retirement for the current generation of preretirement married women. Their expectations regarding retirement should reflect these changing conditions. Relative to earlier cohorts, married women's retirernent plans should be more strongly influenced by considerations of their own economic returns from continued employment. While of interest for its labor-supply implications, this issue is a matter of public concern because of growing evidence that divorce has wide-ranging consequences for the economic well-being of postretirement women (William H. Crown et al., 1993). Findings from the new Health and Retirement Survey indicate that older married women's expectations of working after age 62 are strongly influenced by their expected wage, nonwage compensation such as employer-provided health and disability insurance, and pension income. Expected Social Security entitlements also appear important, although the evidence for their effect is weaker. Like the earlier generation, wives are also influenced by their husbands' plans, suggesting a tendency toward joint retirement.

Holdouts (the continuation of negotiations beyond the contract expiry date) are the most common form of disputes in labor contract negotiations. The authors model holdouts as a delaying tactic employed by unions to obtain information about other bargaining outcomes in their industry. Novel implications of their model include a positive association between holdout duration and the number of bargaining pairs negotiating contracts simultaneously; bunching of holdout durations within these 'negotiating groups'; and fewer strikes among holdouts which end later in groups. Using a large panel of contract negotiations in Canadian manufacturing, the authors find considerable support for these predictions. Copyright 1998 by American Economic Association.