Health and retirement policy

Last week a significant chunk of the UK public sector went on strike. It was over pensions. This isn’t the first of its kind, and it certainly won’t be the last. As the government tries to deal with an ageing population (and imaginary deficit-reduction responsibilities), it is set on a policy of reducing pensions and increasing the retirement age. Clearly this is not a sustainable policy. It seems to me time for health economists to weigh in on this issue and inform a much needed revolution in retirement policy. From a health perspective there are a number of things to consider here; these can be broadly divided in to considerations of efficiency and equity.

Efficiency of retirement policy

There are societal costs (and benefits) relating to retirement, as well as potential health implications for the individual. Two papers were published recently on the issue of whether retirement is beneficial or detrimental to an individual’s health. One of the papers demonstrated that retirement makes people less likely to report bad health, while the other showed that retirement can induce ill-health. If we believe the former then it might be more efficient to offer people earlier retirement, while if we believe the latter there would be efficiency arguments to the contrary. Unfortunately the papers don’t use comparable outcomes; neither using a generic measure of health to capture the health effect of retirement. A second limitation is that neither take in to account the societal costs (or benefits) of retirement. To my knowledge no study exists that fills these gaps.

An ideal analysis might investigate the health impact of retirement alongside the health-related costs and wider societal impacts. If it were the case, for example, that effectively forcing people to remain in work was damaging to their health, it may be more cost-effective to allow them to retire earlier. This seems quite feasible. Clearly, capturing these figures could be difficult, but hope may lie in large studies such as The Health and Retirement Study, which holds many data on the health of people over 50; particularly useful are those relating to their use of health care services and their previous employment. If we were to find that retirement leads to better health and a reduced usage of health care services then current government policies to increase the retirement age may be a very bad idea.

Equitability of retirement policy

There are also some equity concerns when it comes to retirement, as highlighted in a recent editorial news article. The key problem here is that poorer people die younger. As health economists it is also relevant to us that poorer people also tend to be less healthy. The implication of this is that a richer person’s retirement would be longer, and characterised by better health, than a poorer person’s. As such an increase in the retirement age may be disproportionately detrimental to the poor.

I am not suggesting that health economics should dominate this policy area, clearly health is only one aspect of interest. But as we know, health is an important one. There seems to be an assumption amongst decision makers that as people are getting older, people need to work longer. However, it seems safe to assume that when there is a step increase in the retirement age there is not an equivalent increase in the number of jobs available. Here the government’s logic falls down. It seems to me that the health impact of retirement is a reasonable starting point in the evaluation of such policies and the development of new (evidence-based) ones.

Do you believe retirement really can have a definitive impact on health? Should health economists play a part in the formation of policy in this area? Please comment below.

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