The Labor Market Implications of Healthy Aging
IMF Working Papers, November 7, 2025
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Bibliographic details
- Authors: Bertrand Gruss, Eric Huang, Andresa Helena Lagerborg, Diaa Noureldin, Galip Kemal Ozhan
- Published: November 7, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229030236.001
Summary
- New cross-country evidence on healthy aging (the extent to which populations age in better health across successive birth cohorts) and its effects on labor market outcomes for older workers.
- Uses harmonized microdata on individuals aged 50 and above in 41 countries over 2000-22.
- Documents systematic improvements across cohorts in physical, cognitive, and mental health.
- Causal effects estimated by instrumenting individual health with chronic disease incidence.
- Conclusion: Better health increases labor supply (extensive and intensive margins), labor earnings, and labor productivity; healthy aging can mitigate demographic headwinds for growth and public finances.
Data and Methodology
- Sample: individuals aged 50 and above in 41 countries.
- Time span: 2000-22.
- Health measures: physical, cognitive, and mental health.
- Identification: instrument individual health with chronic disease incidence to estimate causal effects on labor outcomes.
Key Findings
- Physical, cognitive, and mental health have improved systematically across birth cohorts.
- Better health increases labor supply along both:
- The extensive margin (labor force participation).
- The intensive margin (weekly hours worked).
- Better health raises:
- Labor earnings.
- Labor productivity.
Magnitudes of Effects (reported)
- A decade of cohort health gains in cognitive abilities raised:
- Older individuals’ labor force participation by about 20 percentage points.
- Weekly hours by around 6.
- Productivity by roughly 30 percent.
- Total labor earnings by roughly 35 percent.
Policy Implications
- Healthy aging can meaningfully bolster labor supply and productivity among older workers.
- Implication: improvements in cohort health can help mitigate demographic headwinds for growth and public finances by increasing participation, hours, productivity, and earnings among older workers.
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