Tuesday, November 01, 2005

Women Have Smaller Pensions

In Britain, women are facing difficulties in receiving pensions as high as those of men. Two of the main reasons for this are lower wages and breaks in employment due to starting and raising families. Historically, women have been shown to have a dominant substitution effect, which in this case means they would work less because of lower compensation. If you analyze this trend, it is self-accelerating and could lead to lower and lower levels of female employment. From a policy-maker's standpoint, would it therefore be beneficial to implement some type of extra incentive for women with families to work? This is not necessarily during the time when the women would be having and raising small children, but perhaps a pumped up pension plan for women who re-enter the workforce after a family. What do you think of this type of policy?

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