Health and labor market effects of an unanticipated rise in retirement age. Evidence from the 2012 Italian pension reform

Abstract

As retirement ages increase around the world, not all workers may be equally able to extend their working lives. In this article, we examine the health and labor market effects of an Italian pension reform that suddenly increased the normal retirement age up to 7 years for women and up to 2 years for men. To do this, we use linked labor and healthcare administrative data, jointly with survey data and difference‐in‐difference methods. Our results show that the reform was effective in postponing retirement among both genders, as pension claiming dropped substantially for older workers. However, there were also side effects as the reform significantly pushed previously employed men and women into unemployment and disability pension. Among women only, the reform also increased sick leave and hospitalizations related to mental health and injuries. These effects were driven by women with previously low health status, suggesting that undifferentiated and abrupt increases in pension age might harm more vulnerable workers. Coherently with the milder tightening of retirement age experienced by men, labor market responses were smaller in size, and they did not suffer any significant health effects.

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“…The global population is undergoing a rapid increase in the proportion of elderly individuals, with the percentage of people aged 65 years and older projected to escalate from 10% in 2022 to 16% in 2050 [ 1 ]. With the aging of the global population, the mandatory retirement age has increased in many countries, but there has been no corresponding rise in health lifespan of older people as expected [ 2 ]. On the contrary, age-related diseases such as diabetes, cardiovascular disease, cancer, Alzheimer’s disease (AD), kidney failure and osteoarthritis are becoming more prevalent, and the huge drug expenditure of the elderly will bring great economic pressure to their families and society [ 1 ].…”