The Effect of Physical and Cognitive Decline at Older Ages on Job Mismatch and Retirement
Physical and cognitive abilities of older workers decline with age, which can cause a mismatch between abilities and job demands, potentially leading to early retirement. We link longitudinal Health and Retirement Study data to O*NET occupational characteristics to estimate to what extent changes in workers’ physical and cognitive resources change their work-limiting health problems, mental health, subjective probabilities of retirement, and labor market status. While we find that physical and cognitive decline strongly predict all outcomes, only the interaction between large-muscle resources and job demands is statistically significant, implying a strong mismatch at older ages in jobs requiring large-muscle strength. The effects of declines in fine motor skills and cognition are not statistically different across differing occupational job demands.
Support from the University of Michigan Retirement Research Center Award RRC08098401-09 is gratefully acknowledged. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.