Adam Smith Institute

I never thought I would get interested in pensions. But in fact the pensions crisis that the UK now faces is something that has to concern everyone, me included – and not just out of personal interest, but in interest of the county.

We're all living longer, and drawing our state pensions for many more years. Meanwhile, a falling proportion of the population is in work and able to contribute towards those pensions. Growing numbers of older people mean a smaller proportion in work: and at the same time, people are spending longer in education (the government is about to make kids stay in school until 17), kicking about the world on gap years, doing MBAs and the like. So everyone in work has to carry more dependents.

But it gets worse. We used to have a good that laid golden pension eggs – the so-called occupational pension system, work-based savings schemes run by employers. Sadly, over-regulation by Gordon Brown has killed that goose. The UK used to have pension savings larger than all the rest of Europe's. But in the last few years, thousands of employer schemes have closed down. Thanks, Gordon.

What do we have instead? Daft schemes and lots of them – like Stakeholder Pensions, the Personal Account, and the Savings Gateway. All trying to get lower-income people to save for their retirement. Nobody bothers to mention that when they do, they will just lose their means-tested benefits, of course. They might as well spend it on beer now than lose it to the benefits office when they retire.

What we need to do, as expert Alan Pickering said in an ASI report years ago, is raise the pension age and index it to life expectancy – and use the money saved to raise the basic state pension so that nobody in retirement needs to rely on means-tested benefits. So when people do save something of their own, they get to keep it, instead of simply losing state benefits.

All that's needed is a bit of political vision and boldness. Oh well, see you in the workhouse.

Nicola Brewer, the head of the Equalities And Human Rights Commission, is proposing new legislation that will give men up to twelve weeks paternity leave at 90% of pay. She hopes the measure will give men the "same parental rights and responsibilities women have."

In reality, the proposal is meant to correct the problems caused by maternity rights legislation. According to the Telegraph:

Many employers are happier to simply bin job applications from women of child-bearing age. They can afford neither the maternity benefit - soon to be extended by the EU from nine to 12 months - nor the potential law suits.

Giving men maternity leave would supposedly allow women to work, allowing men to stay home. Brewer and her populist colleagues, however, fail to grasp the most basic principles of economics. Economic growth is a factor of production, and production a factor of incentive.

If both a husband and wife can get time off to mind their children and still get paid, why wouldn't they? Meanwhile, companies will be stuck with the deadweight of temporarily unproductive employees. This is not to say--for the record--that there should be no maternity leave whatsoever for women.

Biologically, women need some time off to recover from childbirth and to care for the child (men don't lactate yet--although we could see legislation soon requiring it so men and women are equal). The current nine month leave, soon to be extended to one year, is simply too much and ultimately hurts women who want to work. If men want an extended break, they should quit or negotiate a deal with their employer.
 

Chicago economist and Nobel Laureate Gary Becker has specialized in human capital and claims that three quarters of America’s wealth is now represented in its people - meaning that human capital is now more important than physical capital. Today’s wealth of the nation lies in people’s skills, knowledge and health. It’s less the fertility of the soil but that of the population that counts.

In his Treatise on the Family, Becker argues that the quality of children also matters because investment in education results in an ability to command a high price on the labour market. His definition of quality comes very close to that of Thomas Hobbes:

The value or worth of a man is, as of all other things, his price; that is to say, so much as would be given for the use of his power, and therefore is not absolute, but a thing dependent on the need and judgment of another.

The surging role of human capital in Western economies increasingly undermines the politics of the welfare state based on egalitarianism. It is not possible redistribute wealth if it isn’t something people have but is rather what they are. But it goes much further than this with science and health issues. The belief on the left in egalitarianism as an instrument for social justice is increasingly challenged by modern science:

Science measures our material and animal qualities, and it finds them to be patently unequal…We are born physically and mentally unequal, and always remain so…inequality is the human condition.