Health and Retirement of Older New Zealanders (WP 12/02)

Abstract

Increasing life expectancies and uncertainty about future retirement incomes are likely to lead to various changes in behaviour. As expectations are revised, one potentially important adjustment mechanism is in labour force participation rates. There is already evidence these are rising for those beyond the age of eligibility for New Zealand Superannuation.

This paper uses a new source of longitudinal data on the health, labour force participation and retirement decisions of older New Zealanders. The central question addressed is the extent to which labour force participation of older New Zealanders is influenced by their health status (both mental and physical), in addition to a wide range of economic, social and demographic variables. Discrete choice models are employed, and particular attention is given to the potential effects of unobserved heterogeneity.

We find a range of factors to be associated with the decision to retire, notably health status, marital status and financial incentives. After accounting for the confounding influence of unobservables, we find that physical health remains a determinant of labour force exit for older males. Further, we estimate both the marginal and aggregate effects of specific chronic conditions on labour force participation.

Acknowledgements

The authors would like to thank the principal researchers from Massey University and the Family Centre Social Policy Unit involved in HWR and NZLSA projects. In particular, Associate Professor Fiona Alpass and Associate Professor Christine Stephens from Massey University who, as principal investigators of the HWR project and co-principal investigators on the NZLSA project, provided direct access to the project data.

We would also like to acknowledge the funding provided for the HWR project by the Health Research Council of New Zealand, and the funding provided for the NZLSA project from the Ministry for Science and Innovation (formerly the Foundation for Research, Science and Technology).

The authors benefited from discussion and suggestions from David Law and Lynda Sanderson from the Treasury. Special thanks are extended to Nick Carroll and John Creedy of the Treasury, Gemma Tetlow from the IFS and Julia Hall from NatCen for their helpful comments and review, and to the editor Paul Rodway from the Treasury.

Disclaimer

The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the authors. They do not necessarily reflect the views of the New Zealand Treasury or the New Zealand Government. The New Zealand Treasury and the New Zealand Government take no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but with a view to inform and stimulate wider debate.