Health Capacity to Work at Older Ages: Evidence from Canada

Falling pension coverage and rising longevity are putting pressure on older workers to postpone their retirement. However, little is known about the about the ability of Canadian older workers to work longer. To address this gap in knowledge, Kevin Milligan of the University of British Columbia and NBER and Tammy Schirle of Wilfrid Laurier University estimate the work capacity of older working Canadians, with a view to contributing to the discussion of how one’s lifespan should be split between work and retirement.

The analysts examined this issue from the perspective of work capacity and health using two measures of health and two methods of analysis.

In the first, they related the employment rates of men and women in 2011 at each age, 55 to 69, to their respective mortality rates, which were used to approximate overall health. Then, in the resulting estimated employment-mortality relationship for each age, they substituted the 2011 employment rates for the 1976 rates which were higher than in 2011. In this way, they constructed a “counterfactual” or comparison group to see what older workers’ employment would have been if employment rates had not declined between 1976 and 2011. The difference between the observed and comparison group employment rates at each age in 2011 was taken as an estimate of older workers’ extra capacity to work.

In the second method, the health measure consisted of a mix of health indicators including self-assessed health, incidence of major diseases and smoking, body mass index, and number of overnight hospital, doctor and nurse visits. First, the researchers estimated a health-employment relationship at ages 50 to 54, while controlling for the demographic traits of marital status, education and cultural/racial origin. This relationship was then applied to the health conditions of an older age group (55-74 years), resulting in in the predicted employment status for older workers, assuming the younger group’s tendency to work was applicable to the older group’s, i.e., it did not decline. The difference between the actual and predicted employment was used to approximate the capacity of older workers to work more.

This article provides insights into our understanding of older Canadians’ work capacity. The results suggest that older workers may be retiring or forced into retirement too early–possibly five years too early–and that practitioners should be preparing for a growing number of older workers who are remaining in the workforce past retirement age. Similarly, employers should consider the fact that older workers can continue to be productive members of their workforce. At the same time, some older workers may have incapacities preventing them from work, or have sufficient retirement income enabling them to stay out of the paid labour market. This raises the following research questions: to what extent do senior Canadians actually want, or feel financially compelled, to work past retirement age; and how will society offer work to those who must or wish to work longer?