Extending people’s working lives has become a well-established policy in many parts of Europe as governments seek to reduce state pension costs in the context of growing ageing populations. But there are concerns about the health of older workers and what poor health among workers might mean for sickness absence rates and social security costs. New research looking at working longer and sickness absence rates suggests that it might be possible to raise the retirement age without increasing sickness absence rates and social security costs unduly, but the researchers also raise concerns about widening health and social inequalities. Authors of the research Kristin Farrants and Kristina Alexanderson from Karolinska Institutet in Sweden and Jenny Head at University College London outline their findings.
It is generally thought that more people remaining in paid work will put less strain on public pension systems, since there will be more people paying into the system, and fewer people drawing on it, even if some people withdraw their old age pension at the same time as they have paid work.
The flip side of this thinking is that there could be a large group of people, especially those on low incomes and with lower levels of education, who may simply not be healthy enough to justify those increases in retirement age. In other words, increasing the pension age could lead to higher costs for the sickness absence insurance system.
In our research, the first to look at the links between being in paid work and sickness absence after the age of 65, we used Swedish data to look at a 12-year period of the lives of 218,000 workers who turned 65 in 2000, 2005, or 2010.
In line with policies to encourage people to work longer, we could see that the proportion of each of our cohorts in paid work after 65 did indeed increase over time. In fact, between the 2000 and 2010 cohorts, the number of people in paid work aged above 65 doubled from around 50 to 100 thousand. However, in the studied years there were no changes introduced regarding change of pension years. Age 65 was the prevalent age for old-age pension, which could be taken at 61.
When we looked at sickness absence, the proportion of workers aged 66 – 71 years with a sickness absence spell lasting for more than 14 days increased only marginally between the 2000 and 2010 cohorts. This indicates that there is a health potential, a justification for further increases in state pension ages and reassurance for those worried about the social and economic knock-ons of extending working lives.
However, closer scrutiny of the data threw up some concerns around who was most likely to work after age 65 and the implications of that – in other words would some people from certain backgrounds benefit more than others from the ability to work longer and remain healthy thus reinforcing inequalities?
Being a man, having high education, being born in Sweden, living in a large city, and having no prior sickness absence or (especially) part-time disability pension was associated with being in paid work after age 65.
Among those in paid work after age 65, being born in the “Nordic countries outside Sweden” for women, and in “EU-27 outside the Nordic countries” or in “the rest of the world” for men, and living in a large city, having prior sickness absence, and no prior disability pension was associated with having sickness absence.
Actually, several of those with previous sickness absence and/or part-time disability pension also continued in paid work. Those, as well as others, of course had complaints that sometimes led to work incapacity and need of sickness absence – however, to a much lower degree than when aged 60-64.
Possible reasons for their lower sickness absence, especially in relation to the massive increase in proportions of people in paid work, warrants further investigations. The general better health of older people might be one of those aspects, however, work adjustments regarding work hours, work times, work tasks might be others.
Policy makers need to consider how they can best support people with different health conditions to remain in paid work after the age of 65 if health and income inequalities are not to become entrenched and wider as state pension ages rise further in the future. Fairness and balance are key!