Unhealthy retirement?

A major concern for policy makers and government officials in the Western hemisphere is, among others, the issue of public pension systems. With declining fertility rates, higher life expectancy, and declining labour force participation among older workers, many governments are implementing policies aimed at increasing the average retirement age of the workforce, also to guarantee the financial sustainability of pension systems in the long term.

However, not only is there the issue of policy change that would inevitably generate disparity among the different working classes, but there are also dissenting opinions about the effects of these policies on individuals’ health, cognition and wellbeing. For some, retirement (or even early retirement) has positive effects on workers’ mental health and overall well-being; for others, retirement may be harmful, for the void it can leave in terms of purposes in the retiree’s life, affecting thus mental health and cognitive abilities, and overall wellbeing.

In the article “Unhealthy retirement?”, published in the Journal of Human Resources, Fabrizio Mazzonna (Assistant professor at the USI Faculty of Economics) and Franco Peracchi (Professor of the Practice, Dept. of Economics at Georgetown University), show that these two apparently opposite views can in fact coexist. In particular, for people working in more strenuous jobs, retirement has an immediate beneficial effect on both mental and physical health (decreasing depression and mobility limitations) and on cognitive abilities (especially on memory and fluency). On the contrary, for the rest of the workforce, more time spent into retirement has negative consequences for both health and cognitive abilities.   

The findings of professors Mazzonna and Peracchi are particularly relevant for policy makers who, especially in Europe, worry about the effects of raising the retirement age as a way of improving the financial stability of social security programs. Moreover, the study reveals the negative effect of retirement on health and cognition for most of the population – which can be explained also by the fact that in most developed countries the workforce is predominantly in the services and advanced tertiary sector, therefore less exposed to physically demanding occupations. According to Prof. Mazzonna, “a dual pension system, i.e. early retirement for individuals working strenuous jobs and deferred retirement for the rest of the workforce, is debatable and is often discussed by policy makers. However, it is very difficult to classify occupations by their intensity and therefore the implementation of two-tier system would be rather challenging”.

For details on the research paper: http://jhr.uwpress.org/content/early/2016/03/04/jhr.52.1.0914-6627R1.abstract