“Comprehensive health measurements are essential for accurately assessing labor market risks”
What is the focus of the paper?
The paper examines how the observed relationship between health and labor market outcomes depends on how health is measured. It compares administrative medication data, self-reported health, and clinical measures, individually and in combination, and assesses how different definitions affect findings, particularly across age, gender and education groups.
What are the key findings?
- Poor health is consistently associated with a higher risk of exiting paid employment, particularly into disability and, to a lesser extent, into unemployment. While educational differences exist, effects are more pronounced among older workers and men.
- Broader definitions of health – including self-reported disease information, general health, functional limitations and clinical measures – show stronger associations than administrative medication data alone. For instance, the hazard of transitioning into disability rises from 13% to 23% when broader health indicators are used.
- The type of health index (e.g., frailty, probit, principal component, chronic disease) matters less than the richness of the underlying health information.
What are the implications?
- Comprehensive health measurements are essential for accurately assessing labor market risks, particularly for policymaking on disability insurance and pensions.
- Relying solely on administrative data may underestimate risks, especially across gender and age groups.
- Policymakers and actuaries should integrate broader health measures into models to improve risk assessment, and the design of equitable and sustainable labor market and retirement policies.