The Link between Health and Working Longer: Disparities in Work Capacity

Good health is important for employment at older ages. However, little is known about how health-related functional abilities interact with occupational demands to shape work capacity. Using new data, we quantify individuals’ functional abilities, combine that information with occupation-specific ability requirements, and create new measures of individuals’ potential occupations and earnings. We find that average functional abilities, potential occupations, and potential earnings decline only slightly with age, indicating that many Americans maintain work capacity into their late 60s. Gaps in work capacity by race/ethnicity and gender are small, suggesting health is not a major driver of observed earnings disparities. However, gaps in work capacity by education are large and increase with age, suggesting diminished prospects for working longer among those with less education. Although work capacity among Black respondents improves across cohorts, today’s middle-aged white Americans have lower work capacity than those now at retirement age, suggesting rising rates of work disability as these cohorts age.