DP14422 Health and Employment amongst Older Workers

Author(s): Jack Britton, Eric Baird French
Publication Date: February 2020
Keyword(s): health, Labour Supply, retirement
JEL(s): I10, I18, J26
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14422

Health and employment are strongly correlated. This paper reviews the existing evidence and brings in new evidence on the following issues: (a) the measurement of health; (b) the impact of health on employment rather than just the association between health and employment; (c) the mechanisms by which health impacts employment; and (d) the likely effect of recent retirement and disability policy changes in the UK. Although the magnitude of the estimated effect of health on employment varies greatly from study to study, some of this variation is driven by the health measure used. Given our preferred measure, the evidence suggests that 5-10 percent of the employment decline between ages 50 and 70 is due to declining health in England, with the largest effects among low-educated men. Most of the effect comes through declining preferences for work and lower productivity when in bad health, although some of the effect is from government-provided incentives to not work when in bad health, such as from disability benefits.