Poor Health and the Labour Supply of Senior Workers

As Lindeboom (2006) and Deschryvere (2004) highlight, the existing evidence seems to suggest that health plays a significant role in shaping individuals labour supply decisions. Much of the existing literature develops from the presumption that health displays a linear relation with labour market participation or, where endogeneity is ascertained, that it flows in both directions. However, a recent study by Boot et al. (2014) suggests that that health might play moderator effect, i.e. it can change the strength and the direction, on the factors that influence the labour market participation of senior workers. Acknowledging the moderating effect of health is very imortant as it will help us to work out more comprehensive intervention strategies that, among other things, help to boost the labour supply potential of individuals with poor health.

In this paper, we aim to further explore this hypothesis. In line with Boot et al (2014) we adopt a stratified approach, whereby we apply a similar explanatory model to two sub-samples, extracted according to the health status of individuals. However, we promose a more sophisticated analytical model, which recognises the presence of a selection bias (Heckman, 1979) in the analysis of the labour suply of senior worker. Our data suggests that the presence of multimorbidities has a stronger effect on the number of hours women perform, than on their decision of participating in the labour market. Our results also suggest that, for healthy seniors, the heavier the burden of care, the stronger the reduction in the number of hour reported. This is however not the case for people with multimorbidities. Finally, our results also suggest that investment in the prevention of mental health problems would have particularly positive effects in promoting the labour market participation of senior workers with multimorbidities.