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Poor health keeps pensioners from working

A satisfactory health condition and a low pension could theoretically be what make pensioners continue working in the first years after beginning their well-deserved relaxation. The main medical factors that keep older individuals from working are disability, the aftermath of strokes and frequent hospital treatment, Ekaterina Maltseva, a Research Assistant at HSE’s Laboratory of Economic Research of the Public Sector, said in the study, «The Impact of Health on the Labour Supply of Pensioners»

The problem with an aging population, which stems from an increase in the share of older individuals in the overall population, exists in many developed countries. This is the result of a second demographic transition that is taking place. This transition’s main features include a decrease in the birth rate to a low level, when the only source of population growth becomes negative, and an increased lifespan thanks to the successes of medicine and an overall improvement in the quality of life.

In Russia, the share of individuals above the working age is 22.7%. Rosstat’s average forecast says that this figure will increase to 28.8% by 2031. Based on international classifications, this corresponds to a high level of demographic aging.

It is necessary to take into account trends in the changing demographic structure and corresponding consequences in order to adopt timely measures to lower negative economic effects in a timely fashion, Ekaterina Maltseva notes. This concerns the need to increase taxes because of a negative change in the ratio of working people to non-working. This also includes an increase in spending on the pension system, health care, and social services. Currently in Russia, the policy to counteract these factors touches on two main areas – increasing fertility and transitioning from a pay-as-you-go pension system to a defined contribution one. Both of these measures are necessary but not sufficient, however, the study's author says.

Another route for solving the problem is to increase the duration of labour activity by encouraging later retirement. An obstacle to this could be the poor health of pensioners, however.

The aim of Ekaterina Maltseva’s research was to determine the factors that are most significant in a person’s decision to continue working after entering retirement age. In particular, she tried to assess the impact of a respondent’s health on his or her work activity.

Researchers who have previously analysed the behaviour of Russian pensioners typically considered factors connected with labour supply as both stimuli and limitations; that is, they identified the conditions that have a positive or negative effect on the probability of a pensioner’s economic activity or the amount of job offers. Not enough attention was paid to analysing marginal effects, as shown by the numerical change in the probability of economic activity when the variable of interest changes. In addition, it is specifically the analysis of marginal effects that allow for the extent to which a certain factor increases or decreases the labour supply to be identified.

One out of every five pensioners has or is looking for a job

Ekaterina Maltseva’s study is empirical in nature. To conduct econometric analysis, data from the Russian Longitudinal Monitory Survey (RLMS) was used from research waves 9-19 between 2000-2010. Since the work involved the analysis of the labour supply for people of retirement age, the sample was restricted by age and included men older than 60 and women older than 55. It is specifically at this age that most Russians become pensioners.

Variables of economic activity and work hours were constructed as dependent variables.

Economically active pensioners included people who have a job, as well as unemployed individuals determined as such by their desire to find a job. A binary variable assumes the value 0 in the case of economic inactivity and 1 in the case of economic activity. In the sample, about 80% of men and women were economically inactive.

Table 1. Distribution of men and women based on economic activity

Economic ActivityGenderTotal
FemaleMale
Economically inactive19,0556,99926,054
Economically active4,471,7416,211
Total23,5258,7432,265

Source: Maltseva's report

The variable of work hours in the last 30 days was determined for all of an individual’s jobs, including the person’s main job, a second job and any side jobs if they were regular. The majority of respondents in the sample worked forty hours a week, which is about 175 hours per 30 days.

For analysis, the individual characteristics of a person were used, as was information about his or her health, variables characterizing an individual’s income, the person’s financial situation and the relative value of free time. In addition, variables that characterize region and control variables, such as the type of location and region, were also taken into account.

Binary choice models (logit and probit) were used to assess the likelihood of a pensioner’s economic activity, and the models tobit and heckman were used to assess the labour supply. To check the soundness of the results, models from different years were built, though the greatest interest was shown by panel data models (pooled regression and regression with random individual effects). The models were assessed separately for men and women, as different variables have different effects on respondents of different sexes.

Poor health makes it impossible to work

The study’s results showed that poor health is a significant inhibitor of economic activity, especially for people with a higher education. The negative impact of worsening health increases somewhat for men and women in the first five years after retirement, however. It can be assumed that in this time, health does not have such a critical impact on people with a higher education, Maltseva posits. Overall, this could argue in favour of the fact that the age of active longevity ends later than the working age, the researcher concludes.

The existence of a disability, a previous stroke or being in the hospital are the medical factors that limit pensioners’ ability to work; however, the influence of these variables is not as great as the influence of the amount a pensioner receives, the expert said. A low pension is the most important stimulus for continuing to work in a senior age.

Increased unemployment does not significantly impact pensioners’ employment. This is not a determining factor for an older person who wants to work.

 

June 30, 2014