Since World War II, retirement has gone from a fringe to a mass phenomenon in western countries. Many people long for the day when they don’t have to toil away and instead enjoy uninterrupted leisure. No more job stress, no more problems. Who could argue against that dream? However, it is also suggested that people need to work longer to ensure sustainable pension systems. Won’t this have the effect of reducing health among the elderly?
Although this sounds like a plausible scenario, it is far from clear. Whether people have fewer or more incentives to invest in their health after retirement depends on whether the marginal benefit of better health is higher or lower compared to before, and there is no straightforward answer to this question. And while retirement may decrease work related stress, it is in itself a very stressful event, as people go abruptly from working full time to not working at all. Similarly, people might lose their social networks from their jobs, thus spurring loneliness that may result in deteriorating mental health, but people may also have more time to pursue voluntary networks outside of work when they’ve retired. In terms of physical exercise, people may exercise less following retirement, if their exercise was mainly linked to their work, or more, if they now use their leisure for this purpose. One effect that is pretty clear-cut, however, is that retirement in most cases produces a drop in income – which may very well have a negative impact on health. Overall, however, the theoretical relationship between retirement and health is ambiguous.
The existing empirical literature on the subject is also mixed, with some studies finding positive, some negative, and some null effects. But it is also the case that many of these studies (1) suffer from methodological problems, and/or (2) do not separate the short-term from the long-term impact of retirement. In the beginning, retirement may very well be positive for health, perhaps because of the spike in leisure time and perhaps because people have invested in their health in anticipation for retirement. Yet the negative effects may still emerge after some time.
In my paper, I attempt to account for the problems in previous research in order to analyse the impact of health on retirement among 7,000-9,000 people across 11 European countries. I find consistently large negative effects on self-assessed health, mental health, and physical health. However, these negative effects only emerge after a couple of years. In the short run, there is either no impact or actually some evidence of a positive effect on health. When the honeymoon period is over, however, the negative effects are significant indeed.
In other words, my study gives support to the argument that retirement actually reduces health, both physical and mental. Consequently, policies that induce people to work longer, such as increased state pension ages, may not only produce sustainable pension systems, but also lower health care costs and raise health levels among the elderly. Win, win, win.
Gabriel H. Sahlgren is the author of Work Longer, Live Healthier: The relationship between economic activity, health and government policy