This chapter considers the issue of early exit and marginalisation from a British perspective. The UK can be described as having a liberal welfare regime (Esping-Andersen, 1990). According to Esping-Andersen (1999, p 74): “liberal welfare regimes in their contemporary form reflect a political commitment to minimise the state, to individualise risks, and to promote market solutions.” In terms of labour-market policy, this is exemplified by the dominance of needs-based and means-tested unemployment benefits as well as the relatively high importance of occupational pensions. Moreover, liberal social policies favour a passive approach to employment management and largely unregulated labour markets.

Building upon Esping-Andersen's work, a taxonomy of different unemployment welfare regimes has been developed (Gallie and Paugam, 2000). For an overview see Plougmann (2002). This taxonomy is based on the following three indicators:

• • the proportion of unemployed people covered by insurance benefits;

• • the level and duration of the benefits;

• • the scope of active labour-market policy.

The UK belongs to the category of a liberal regime with minimum protection, where only a few unemployed people are supported by the unemployment benefit system, the amount of compensation is limited and active labour-market policies are weak.

Early exit from the labour market: a history

At a time when the UK's population has been ageing rapidly, there has been a marked decline in the labour-force participation of those aged 50 and over. Between 1979 and 1984, the rate of economic inactivity among people aged between 50 and the state pension age increased dramatically, from below 20% to over 30%. While inactivity among this group fell slightly in the late 1980s as the UK economy grew, this did not last, reaching 32% by the mid-1990s (Her Majesty's Treasury, Department for Work and Pensions, 2001).

Table 13.1 shows trends in labour-force participation rates among older workers over the last two decades. There has been a marked decline in participation rates among older men. Recently, this trend has reversed for the 55-59 and 60-64 age groups, though the rates are some way below 1984 levels. By contrast there has been increasing labour-force participation among older women.