Working Paper: NBER ID: w30036
Authors: Benjamin Berger; Italo Lopez Garcia; Nicole Maestas; Kathleen J. Mullen
Abstract: Good health is important for employment at older ages. However, little is known about how health-related functional abilities interact with occupational demands to shape work capacity. Using new data, we quantify individuals’ functional abilities, combine that information with occupation-specific ability requirements, and create new measures of individuals’ potential occupations and earnings. We find that average functional abilities, potential occupations, and potential earnings decline only slightly with age, indicating that many Americans maintain work capacity into their late 60s. Gaps in work capacity by race/ethnicity and gender are small, suggesting health is not a major driver of observed earnings disparities. However, gaps in work capacity by education are large and increase with age, suggesting diminished prospects for working longer among those with less education. Although work capacity among Black respondents improves across cohorts, today’s middle-aged white Americans have lower work capacity than those now at retirement age, suggesting rising rates of work disability as these cohorts age.
Keywords: health; work capacity; employment; disparities; aging workforce
JEL Codes: J14; J15; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| health-related functional abilities (I12) | work capacity (J29) |
| adverse health events (I12) | reduced functional abilities (J14) |
| reduced functional abilities (J14) | limited job performance (J29) |
| cognitive abilities (G53) | employment opportunities (J68) |
| cognitive abilities (G53) | maximum potential earnings (J31) |
| educational disparities in functional abilities (I24) | difference in maximum potential earnings (J31) |
| age (J14) | average functional abilities (G53) |
| age (J14) | potential occupations and earnings (J39) |
| health disparities (I14) | diminished labor market opportunities (J79) |