4.1 Who are older employed people?
Table 2 describes the socio-economic characteristics of the older population by their working status in 2001 and 2015. On average, employed people were about five years younger than their non-employed counterparts. The age gap is quite stable across 2001 and 2015, although the average age incrementally increased over time for both the employed and non-employed older population. There were more males in the older employed group in both years.
Employed older adults were more educated than their non-employed counterparts, particularly in 2015. They were more likely to be Australian born, and less likely to be Aboriginal or non-English migrants. Although there were some changes in relative ethnic composition over time, the overall ethnic patterns did not change.
Table 2 also presents unadjusted health and economic outcomes by the working status. Older employed adults were healthier than those not employed in all health measures such as mental health, physical functioning, general health, number of health conditions, and self-assessed health measure. The health gap between the two groups persisted over the period. Older workers earned more, and had significantly higher superannuation and net financial assets than those who were not in the labour force. In 2001, on average, regular private income was almost 5 times higher among those who were employed as those who were not, and about 3 times higher if government supports such as pension and social welfare benefits are included. The employed group also had about 88% more in superannuation and 57% more in net financial assets than the non-employed group in 2001, the gaps narrowed in 2015 but remained large.
In summary, workers aged 50-70 were more likely to be younger, men, healthier, more educated, have higher income, net financial assets, and superannuation than the unemployed in the same age cohort.
Table 2: Descriptive summary, older population aged 50-70, 2001 vs. 2015
|
2001
|
2015
|
Employed
|
Unemployed
|
Employed
|
Unemployed
|
Mean (SD)
|
Mean (SD)
|
Mean (SD)
|
Mean (SD)
|
Worker characteristics
|
|
|
|
|
Age
|
55.8 (4.7)
|
61.2 (5.8)
|
57.0 (5.1)
|
62.4 (5.6)
|
Gender (Male =1) (% of male)
|
56.6 (49.6)
|
40.6 (49.1)
|
53.7 (49.9)
|
39.3 (48.9)
|
Tertiary education (% with tertiary education)
|
51.2 (50.0)
|
33.9 (47.3)
|
68.7 (46.4)
|
47.4 (49.9)
|
Ethnicity (%)
|
|
|
|
|
[1] Australian born
|
69.1 (46.2)
|
60.5 (48.9)
|
69.7 (46.0)
|
63.0 (48.3)
|
[2] Aboriginal
|
0.79 (8.8)
|
1.3 (11.1)
|
1.2 (10.9)
|
1.79 (13.3)
|
[3] English speaking migrants
|
15.0 (35.7)
|
15.1 (35.8)
|
12.5 (33.0)
|
12.7 (33.3)
|
[4] Non-English speaking
|
15.1 (35.8)
|
23.2 (42.2)
|
16.6 (37.3)
|
22.6 (41.8)
|
Health variables
|
|
|
|
|
Mental health (scaled 0-100)
|
78.3 (15.3)
|
71.9 (19.5)
|
76.8 (15.9)
|
71.9 (19.0)
|
Physical functioning (scaled 0-100)
|
83.7 (19.3)
|
66.6 (26.6)
|
84.3 (18.8)
|
68.4 (26.6)
|
General health (scaled 0-100)
|
71.9 (19.0)
|
58.5 (24.8)
|
68.3 (19.1)
|
56.7 (23.9)
|
No of health condition (1-15)*
|
0.27 (0.52)
|
0.76 (0.77)
|
0.30 (0.57)
|
0.89 (0.82)
|
Self-assessed health (%)
|
|
|
|
|
[1] Excellent
|
13.0 (33.7)
|
7.3 (26.1)
|
8.2 (27.3)
|
4.2 (20.1)
|
[2] Very good
|
41.3 (49.2)
|
22.2 (41.6)
|
34.7 (47.6)
|
20.9 (40.7)
|
[3] Good
|
34.5 (47.5)
|
34.3 (47.5)
|
41.5 (49.6)
|
38.2 (48.6)
|
[4] Fair
|
9.6 (29.5)
|
26.5 (44.1)
|
14.6 (35.4)
|
27.0 (44.4)
|
[5] Poor
|
1.6 (12.5)
|
9.6 (29.5)
|
1.1 (10.4)
|
9.7 (29.6)
|
Economic variables
|
|
|
|
|
Regular private income
|
45.2 (48.7)
|
8.8 (18.1)
|
55.0 (60.3)
|
12.2 (26.6)
|
Income from all sources
|
46.0 (48.4)
|
14.8 (16.7)
|
56.0 (59.8)
|
20.0 (25.0)
|
Superannuation**
|
184 (241)
|
98 (214)
|
269 (384)
|
209 (443)
|
Net financial assets **
|
312 (478)
|
199 (396)
|
391 (667)
|
331 (808)
|
Notes: All monetary variables were adjusted for the survey sampling weight, and discounted to 2002 price. The Economic outcome variables were in AU$1,000. *Data available from wave 3 onwards. **Data were available in every four years since 2002.
4.2 Labour market participation by the older population
The workforce participation rate of older Australians aged 50-70 also increased steadily over the past 15 years commencing 2001 (Figure 1), from 49% in 2001 to 59% in 2015. Participation increased for both men and women. Although the workforce participation rate is considerably higher for men, the gender participation gap between men and women slightly decreased, from 17% in 2001 to 14% in 2015. This rising participation implies that the policy aiming at encouraging older people to participate or to stay in the labour market longer has been a success.
4.3 Little evidence of improvement in health of the older population
The rise in the older workers’ labour force participation signals success for policies aiming to increase labour supply. However, this raises the question of whether or not rising participation reflects improvement in health, given the mixed evidence to date we hypothesised that health profile of employed older workers may not have improved [H1]. In this subsection, we look into changes in health of the older population over the period to answer such question.
In Figure 2, we compared health outcomes of the following years with the base year 2001, adjusting for some key socio-economic characteristics such as age, sex, ethnicity, education and equivalized household income. It shows that for the older population, there is a gradual decline in all health outcomes over the study period, except for physical functioning of the employed people has remained rather stable over the same period.
The estimates using equation (1) shows that comparing to the baseline in 2001, in 2015 the mental health of similar (in terms of age, sex, ethnicity, education and equivalized household income) employed people worsened by 0.1 standard deviations (p<0.01). Their general health declined by 0.22 standard deviations (p<0.01), and the number of health conditions increased slightly by 0.06 standard deviations (p<0.01).2 Only their physical functioning barely improved (statistically insignificant) from the baseline health. For unemployed people, their health outcomes over the same period deteriorated faster than their employed counterpart’s health outcomes. Unemployed people’s mental health was 0.23 standard deviations lower (p<0.01), physical functioning 0.1 standard deviations lower (p<0.01), general health 0.3 standard deviations lower (p<0.01), and number of health conditions 0.42 standard deviations higher (p<0.01).
Overall, regardless of working status in most instances we observed health deterioration. However, employed people are clearly healthier than unemployed people, and their health outcomes have deteriorated more slowly than those of the unemployed over the same period.
4.4 Widening health gaps
In this subsection, we considered the health changes over time across older employed and unemployed people, and propose contributors to the widening gap. Though employed older adult’s health has not improved over time, the health of the unemployed people has deteriorated faster. This has generated a widening health gap between the two groups, as proposed in Hypothesis 2 (Figure 2). This is also confirmed by a statistical test which shows that the interaction terms between the working status (1/0) and the time variable in the health prediction equation (1) are statistically significant (the test results would be available upon request). The health selection process may operate i.e. better health supports the unemployed returning to the labour market (Figure 3), while poorer health is found amongst employed people exited the workforce (Figure 4).
We observed widening health gaps between those who were working and those who were not, begging the question - what contributes to such a widening gap? To answer this question, we broke down the sample by employment transition into four groups: re-entering the workforce, remaining employed, exiting the workforce, and remaining unemployed. For people who are working in the current year, they either remained employed or became unemployed in the following year. For example, among 1,733 people aged 50-70 who were employed in 2001, 1,538 people stayed employed and 195 people became unemployed (exited the workforce) in 2002. For people who are unemployed in the current year, we tracked their employment status in the following year. They were either unemployed or returned to the workforce in the following year. For example, among 1,566 people aged 50-70 who were unemployed in 2001, 1,471 people remained non-employed and 95 people became employed in 2002.
In Figure 3, we compared health outcomes by employment transition status. Figure 3 (and also Figure 4) was adjusted for age, sex, ethnicity, education, equivalized income per capita, and time effect using the random effect maximum likelihood estimator. It clearly shows that the “re-entering” group has better health outcomes than the “remain non-employed” (Figure 3). The health scores for physical functioning, mental health and general health of the re-entering people were considerably higher than the “remain unemployed” people, and they also have a significantly lower number of health conditions. Moreover, the health gap between these two groups has widened. Departure of the re-entering people, who have better health, from the unemployed group results in lowering health outcomes (general health, physical functioning and mental health) and increasing number of health conditions of the remaining unemployed people. This partly contributes to widening health gap between who were working and who were not.
In brief, the exit of the poorer health workers from the employed group and the re-joining of healthier older adults to the workforce is a health selection effect that increases the health gap between workers and those who were not working. The movement into and out of the labour market by older people with differing health status has contributed to the widening health gap.
4.5 Widening health gaps accompanied by widening economic outcomes
The widening health gap raises a question of what it means for economic outcomes in the short term and in the long term, and for socio-economic inequality. We had hypothesized that the widening health gap is accompanied by widening income, superannuation, and net financial asset gaps. In this subsection, we considered these economic outcomes: incomes without government support, incomes with government support, superannuation, and household net financial assets.3
a. Short-term economic outcome: Income
Income is measured for a financial year. As shown in Figure 5, the widening health gap (as seen in Figure 2) is accompanied by widening income gap. There is strong evidence of widening income gap between those who were working and who were not over the considered period. When considering income with government support provided to the unemployedthe gap becomes smaller, but is still significantly large (the right panel, Figure 5).
b. Long-term economic outcomes: superannuation and net financial assets
Over time, working and savings from incomes helps build up superannuation and net financial assets for older workers. Prolonged employment and higher incomes contribute to larger cumulative savings, superannuation and financial assets [30, 31]. As we wish to examine the association between the economic outcomes and health in the wage labour market context, we exclude other economic outcomes e.g. wealth which is mainly generated from saving of labour market earnings and from investment profits (business and property investment). The latter are not related to the wage labour market activities, thus we use net financial assets which exclude business and property assets and related debts. The net financial assets capture superannuation, savings on bank accounts, bank account balances, cash and equity investments, trust funds and life insurance. Consequently, the household net financial assets and superannuation are better measures of long term accumulated economic outcomes of the wage labour market participation.
Figure 6 shows how superannuation and household net financial assets change over the period 2002 to 2014 by employment status. It shows that employment boosted superannuation and net financial assets, generating a widening gap in both superannuation and net financial assets between those who were working and who were not. However, we observed large standard deviations in the changes of superannuation and the financial assets; indicative of the economic outcomes are heterogeneous within each group. We will discuss in more details in the following section.
4.6 Widening health gaps is also accompanied by increasing economic inequality
a. Within and between group comparisons
The heterogeneous superannuation and net financial assets indicates that each employment status group is composed of diverse individuals. For example, in the unemployed group, some people were healthy and wealthy but chose to retire early (not working). In contrast, some people were unemployed because they were unhealthy. The sample stratification by wealth distribution will provide more insight into the heterogeneity of the sample.
Within each group by employment status, we stratified the samples into the top 20% richest and the remaining 80% (also called the bottom 80% in this paper) based on net wealth distribution. We then estimated superannuation, net financial assets, and some key health measures (see Table 3 below). Among the unemployed group, the top 20% of the wealth distribution had very high net financial assets and superannuation relative to the remaining (80%) group. Their net financial assets and superannuation were very close to those of the top 20% wealthiest of the employed people. Their superannuation was even the highest ($578,000) among the four subgroups. This group was obviously healthy and wealthy, but chose to retire early because they had sufficient sources of income from superannuation and financial assets. This group also had much better health outcomes than the rest of the unemployed group. On the contrary, the remaining 80% of the unemployed group had considerably lower net financial assets, low superannuation, and poor health outcomes.
Table 3: Health, superannuation, and financial assets by working status, aged 50-70
|
Employed
|
Unemployed
|
|
Top 20%
|
Remaining 80%
|
Top 20%
|
Remaining 80%
|
Net financial assets
|
1,011
|
206
|
1,012
|
106
|
(Std Dev)
|
(1,152)
|
(194)
|
(1,113)
|
(146)
|
Superannuation
|
572
|
155
|
578
|
67
|
(Std Dev)
|
(599)
|
(159)
|
(666)
|
(114)
|
Physical functioning
|
86.9
|
83.5
|
80.0
|
65.0
|
(Std Dev)
|
(17.0)
|
(19.1)
|
(20.2)
|
(27.0)
|
Mental health
|
80.6
|
77.1
|
78.9
|
70.0
|
(Std Dev)
|
(12.7)
|
(15.6)
|
(16.1)
|
(19.6)
|
General health
|
73.0
|
69.1
|
66.8
|
54.5
|
(SD)
|
(18.0)
|
(19.4)
|
(21.2)
|
(24.6)
|
Number of health conditions
|
0.37
|
0.50
|
0.85
|
1.93
|
(SD)
|
(0.91)
|
(1.18)
|
(1.66)
|
(2.34)
|
Note: The estimates were adjusted for sample weight, but were not adjusted for age, sex, ethnicity, and education. Standard deviations are in parentheses.
Therefore, the top 20% of unemployed were ‘wealthy and healthy’. This subgroup had about 6 times more net wealth as that of the remaining 80% of the unemployed, 10 times the net financial assets, and 9 times the superannuation of the remaining 80% of the unemployed. For this healthy and wealthy subgroup, irrespective of their health, their wealth protected them. The remaining 80% of the unemployed were ‘un-wealthy and unhealthy’.
The top 20% of employed workers is similar to the top 20% of the unemployed in terms of health, net financial assets and superannuation. The only difference is that they chose to remain in the labour market. In contrast, the remaining 80% of the employed were less wealthy but they were relatively healthy. Their health outcomes were close to those of the top 20% of both the employed and unemployed groups. Their better health hence enabled them to remain in the labour market.
Figure 7 considered how superannuation changed over the period using 2002 as the baseline. The top left panel compares the top 20% wealthiest and the remaining 80% of the employed group. It shows a widening gap in superannuation, though the remaining 80% subgroup’s superannuation has improved over time. The gap in superannuation between the top 20% and bottom 80% of the unemployed group has grown faster than the gap between the top and bottom of the employed group. This again confirms that the wealthy and healthy within the unemployed chose to retire early or chose not to work in the wage labour market because they had sufficient superannuation and other sources of income.
The bottom right panel compares superannuation changes between all employed workers and the remaining 80% of the unemployed group (the un-wealthy and unhealthy). The bottom left panel compares superannuation changes over time between the “unhealthy and un-wealthy” in the unemployed group and the “healthy and un-wealthy” in the employed group. This comparison best demonstrates the role of health in employment and cumulative saving/superannuation. It is likely that better health promotes employment participation among older people which in turn helps build up superannuation. The gap in superannuation between these two subgroups has widened over the period.
In Figure 8, we repeated the same analysis for net financial assets as for superannuation in Figure 7 and found a similar pattern. The gap in net financial assets has widened over time within each working status group (top two panels of Figure 8), and across groups (bottom two panels). Remaining employed due to better health helps build up financial assets faster than being unemployed (bottom left panel). The unhealthy and un-wealthy unemployed group face double burdens of poor health, and low and little improvement in superannuation and net financial assets.
b. The un-wealthy and unhealthy group left behind – worsening health and economic inequality
The ‘left-behind’ group (the un-wealthy and unhealthy), the remaining 80% of the unemployed is facing a growing health and economic gap. They endure poor health and have no opportunity to improve their income. Below we have provided further evidence that the un-wealthy and unhealthy group has declining resources to improve their health and wellbeing.
Within the unemployed group comparison
In Figure 9, we compared four economic outcome changes between the top 20% wealthiest and the remaining 80% (the left-behind) of the unemployed. The economic outcomes are regular private income, total income (regular private income and government supports such as pension and social welfare benefit), accumulated superannuation, and household net financial assets.
Compared with the baseline year 2002, the wealthiest of the unemployed group received more than $20k income in 2014, while the left behind group’s income changed very modestly. The addition of the government support made a small change to the total income over the period, of just less than $5k. In terms of superannuation and net financial assets, the left behind group own relatively small amounts of superannuation and financial assets in relation to the wealthiest, and the gap between these two groups has become very large (bottom panel of Figure 9).
The un-wealthy and unhealthy group is falling behind in all our economic outcome measures. This resulted in rising health and economic inequality. Figure 10 compared the economic outcome changes over time for the un-wealthy and unhealthy group with those of all employed older workers. It again shows widening gaps in income, superannuation and net financial assets. The employed group’s income, superannuation and net financial assets improved over time at a greater rate than those of the left-behind group.
Briefly, considering all the comparisons we have made so far, the common finding is that those who had poor health and were (un)wealthy are falling behind in all economic outcome measures such as income, income with the government support, superannuation and net financial assets.
2We standardized (by its mean and standard deviation) all health variables in order to put the health outcomes in the same range figures for convenient comparison.
3Note that we do not add up superannuation or net financial assets with the income as income is measured for a financial year, while superannuation or net financial assets are stock and accumulated over time.