Is retirement good for your health?

For a few decades, many developed countries have faced decreasing birth rates and ageing populations. As a population ages, the costs to social security and welfare increase, eroding the country’s budget. Japan is one of the countries that has an ageing population. To cut some of its costs, the Japanese government has changed the basic pension eligibility age from 60 to 65. However, many firms set their mandatory retirement age to around 60. As a result, many elderly people arrive at the mandatory retirement age before they start to receive their public pension. The Japanese government has recently encouraged firms to re-employ elderly people after reaching the mandatory retirement age through an intervention in the labour market.

It is possible that there are side effects of the re-employment promotion policy. One possible concern is the effect on health of elderly people as they continue to work after the mandatory retirement age. For example, if working is good for the health of elderly people, this could lead to reductions in medical expenses. On the other hand, the side effect would be ‘bad’ if working is bad for the health of elderly people; in other words, it could lead to increases in medical expenses. The effect on health after elderly people continue to work is important and we thus evaluate this re-employment promotion policy.

The impact of retirement on health

Over the past decades, a number of studies have investigated the relationship between retirement and health. However, there is no unifying view about the impact of retirement on health.

• Some studies conclude that retirement has a positive effect on health outcomes defined as mental health or physical health (Charles 2004, Johnston and Lee 2009).
• Others conclude that retirement has either no effect or a negative one (Rohwedder and Willis 2010).

Why are these results different?

The key to explaining these differences is the channel through which retirement influences health. It is possible that the effect of retirement on health is heterogeneous. Alternatively, these studies could be finding different results because the factors influencing the health of elderly people have changed heterogeneously after retirement in each study.

The challenge of analysing the mechanism behind the effect of retirement on health has been tackled recently. Eibichi (2015) is an important work in this regard, in which the author explains why retirement influences health. This study analyses the changes in health behaviour and time usage in Germany. We also consider that the changes in lifestyle habits, which are similar to ‘changes in health behaviour’ (Eibichi 2015), and could be an important channel through which retirement influences health.

In fact, medical research so far has confirmed the relationship between health and lifestyle habits (Jemal et al. 2008). According to the results of these research studies, if there is a causal relationship between lifestyle habits and retirement, changes in the former could be a channel through which the latter influences health, explaining why there is no unifying view about the impact of retirement on health (see Figure 1). Under the mechanism of Figure 1, if elderly people change their health behaviour after retirement, the effect of retirement on health would be different.

Figure 1. Hypothetical relationship between retirement and health

Hypotheses, research design, and results

We analysed the effect of retirement on lifestyle habits – including drinking, smoking, exercise, and sleeping – that could all influence health. Regarding the effect of smoking and drinking on retirement, we propose two hypotheses:

• First, people drink or smoke because of workplace stress before retirement. If this is done because of workplace stress, they would do these activities less when they are relieved from workplace stress after retirement.
• Second, people drink or smoke with their colleagues at their workplace because their colleagues want to do so. We call this the ‘peer effect’.

In Japan, we believe the peer effect is the key to explaining why people drink or smoke at their workplace. Elderly people would decrease their level of drinking or smoking after retirement if they drank or smoked as a result of the peer effect at their workplace, as they would no longer see their colleagues after retirement.

In Japan, there is a custom for businesspeople to drink with their colleagues or business partners after work. As a result, the second proposition is the key hypothesis regarding drinking behaviour in Japan. From our descriptive statistics, it seems retirement could influence lifestyle habits (see Figure 2).

We conducted an econometric analysis to find out which hypothesis was supported by our data. Our analysis used the Japanese Study of Ageing and Retirement (JSTAR) to analyse the effect of retirement on lifestyle habits. This is a panel survey of elderly people aged 50 or older in Japan. The study has counterparts in other countries, such as the China Health and Retirement Longitudinal Study (CHARLS), the English Longitudinal Survey on Ageing (ELSA), the Korean Longitudinal Study of Ageing (KLoSA), the Longitudinal Ageing Study in India (LASI) and the Survey on Health, Ageing, and Retirement in Europe (SHARE). We summarise the results:

• First, elderly people reduce their smoking and alcohol intake after retirement.

Furthermore, they increase the frequency of exercise and sleep on weekdays although the time spent on sleeping during holidays seems unchanged, which implies that elderly people have changed their time allocation after retirement.

• Second, by controlling for many factors including the level of stress at workplace, we find that the peer effect is important in decreasing the level of smoking or drinking after retirement in Japan. Therefore, we support the second hypothesis.

How elderly people will change their lifestyle habits after retirement  

We find that the peer effect is the key factor that explains changes in lifestyle habits after retirement in Japan. However, we do not think that this result is universal. In many other countries, business people do not drink often with their colleagues after work. People in some countries might not change their lifestyle habits after retirement, and, as a result, health might not change post-retirement. This possibility shows that the changes in lifestyle habits might be an important channel to explain why the effect of retirement on health varies across the different studies. We will check both behavioural changes in possible channels influencing health after retirement and how health has changed after retirement in many countries. To begin with, we will compare the changes in lifestyle habits in the US, Europe, Korea, and Japan after retirement in a forthcoming study.

References

Charles, K K (2004), “Is Retirement Depressing? Labor Force Inactivity and Psychological Well Being in Later Life,” Research in Labor Economics, 23: 269–299.

Eibich, P (2015), “Understanding the Effect of Retirement on Health: Mechanisms and Heterogeneity,” Journal of Health Economics, 43: 1–12.

Jemal A, M J Thun, L A G Ries, H L Howe, H K Weir, M M Center, E Ward, X-C Wu, C Eheman, R Anderson, U A Ajani, B Kohler and B K Edwards (2008), “Annual Report to The Nation on The Status of Cancer, 1975-2005, Featuring Trends in Lung Cancer, Tobacco Use, and Tobacco Control,” Journal of the National Cancer Institute, 100(23): 1672–94.

Johnston, D W and W S Lee (2009), “Retiring to the Good Life? The Short-term Effects of Retirement on Health,” Economics Letters, 103(1): 8–11.

Motegi, H, Y Nishimura, and K Terada (2015), “Does Retirement Change Lifestyle Habits?” RIETI Discussion Papers 15-E-068

Rohwedder, S and R J Willis (2010), “Mental Retirement,” Journal of Economic Perspectives, 24(1): 119–138.

This article is published in collaboration with VoxEU. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Hiroyuki Motegi is a Japan Society for the Promotion of Science research fellow and a Ph.D. candidate at the University of Tokyo. Kazuyuki Terada is a Ph.D. candidate in Economics at the University of Tokyo. Yoshinori Nishimura is a Ph.D. candidate in Economics at the University of Tokyo.

Image: An elderly man. REUTERS/Ricardo Moraes