Healthy Aging is a Powerful Economic Tool: Improved Cognitive Health Boosts Older Workers' Productivity by 30%
SDG 3: Good Health and Well-being | SDG 8: Decent Work and Economic Growth
Institutions: Ministry of Health and Family Welfare | Ministry of Labour and Employment | NITI Aayog
An IMF Working Paper The Labor Market Implications of Healthy Aging establishes that healthy aging—populations improving their health across successive birth cohorts—has a powerful and quantifiable causal effect on labor markets. The study, using harmonized microdata on individuals aged 50 and above across 41 countries (including 12 emerging markets) over 2000–2022, documents systematic improvements in physical, cognitive, and mental health across cohorts. This better health directly bolsters labor supply and productivity among older workers, offering a meaningful way to mitigate demographic headwinds on economic growth and public finances.
Key Quantified Causal Impacts
The paper quantifies the substantial causal effects of improved health, highlighting the dominant role of cognitive abilities:
Productivity and Earnings: A decade of cohort health gains in cognitive abilities alone:
Boosted labor productivity (proxied by hourly earnings) by roughly 30 percent.
Increased total labor earnings by roughly 35 percent for older workers.
Labor Supply Margins: Improved health increases labor supply along both the extensive and intensive margins. A decade of cognitive gains raised:
Extensive Margin (Participation): The likelihood of participating in the labor force by about 20 percentage points.
Intensive Margin (Hours Worked): Weekly hours worked by around 6 hours.
Age-Equivalent Gains: The study translates health improvements into “age-equivalent gains,” suggesting that the average 70-year-old in 2022 had cognitive ability comparable to that of an average 53-year-old in 2000.
These findings are critical for India as the country transitions toward an aging population structure. The evidence strongly validates policies that treat investments in cognitive and physical health as a core macroeconomic growth lever, as this directly counters the expected demographic drag and sustains high productivity. Policies should aim to encourage longer, more productive careers for older individuals who are physically and mentally fit.
Follow the full paper here: The Labor Market Implications of Healthy Aging