IMF Working Paper: Healthy Aging Found to Significantly Boost Older Workers' Labor Supply in Asia
SDG 3: Good Health and Well-being | SDG 8: Decent Work and Economic Growth
Ministry of Health and Family Welfare | Ministry of Labour and Employment
The IMF Working Paper titled ‘Can Healthy Aging Boost Labor Supply? Evidence from Korea’ examines the phenomenon of ‘healthy aging’—the improvement of physical health across successive birth cohorts—and establishes its causal link to increased labor supply among individuals aged 50 and above in Korea and other key Asian economies, including India.
The study uses survey-based microdata to analyze these trends, focusing on how improvements in physical health influence labor market outcomes, such as labor force participation and retirement decisions.
Key findings from the comparative study include:
Korea’s Health Gains: Korea exhibits robust healthy aging trends. For example, the grip strength (a physical health indicator) of an average 70-year-old in 2022 was comparable to that of a 60-year-old in 2006, suggesting significant age-equivalent health gains. This healthy aging trend is estimated to have increased the labor supply of older individuals in Korea by around 1.9 percentage points per year during the 2006-2020 period.
Impact on Work: A decade of healthy aging, measured by grip strength improvements, increased the probability of labor force participation by nearly 20 percentage points and reduced retirement rates by a similar margin.
India and Asian Peers: India is included as one of the comparator countries in the study, utilizing data from the Longitudinal Aging Study in India (LASI). Healthy aging trends and the causal effects on labor supply in India are found to be qualitatively similar but quantitatively smaller compared to Korea. India, along with China and Thailand, experienced a rise in Healthy Life Expectancy (HALE) faster than the world average between 2000 and 2021.
What is ‘Healthy Aging’? Healthy Aging is the trend observed in demographic and health data where individuals from more recent birth cohorts experience better physical and mental health at a given chronological age compared to individuals from earlier cohorts, effectively leading to an age-equivalent health gain.
Policy Relevance
The study provides compelling micro-level evidence that health improvements serve as a critical engine for boosting voluntary labor supply, offering a powerful tool to mitigate the economic drag of India’s population aging.
Monetizing the Health Dividend: Between 2000 and 2021, India recorded 4.0 additional years of Healthy Life Expectancy (HALE), positioning the country to monetize this significant health dividend. Leveraging these longer, healthier working lives requires specific policy interventions to ensure the gains are translated into sustained economic participation.
Health and Behavioral Challenges: Policy must urgently address India’s distinctive health risk factors that could impede future healthy aging trends and depress labor supply.
High Chronic Disease Burden: Chronic diseases are prevalent, including high blood pressure and diabetes , which constrain labor supply by impairing physical and cognitive functioning.
High Incidence of Overweight: India has a notably higher incidence of being overweight compared to Korea and Japan, a key behavioral risk factor.
Required Policy Actions: To enhance healthy aging and extend working lives, the government must adopt a two-pronged policy approach focused on health promotion and market reform:
Health Promotion: Expand preventative healthcare (e.g., immunization and health screenings) and mental health services. Implement targeted policies to discourage unhealthy behaviors, such as substance-abuse prevention, tobacco/junk food taxes, and promoting physical exercise.
Workplace Adaptation: Complement health policies with labor market reforms that promote higher effective retirement ages through incentives to postpone retirement. This must be coupled with lifelong reskilling, age-friendly workplaces, flexible work policies, and measures to combat age discrimination to maintain labor market attachment for older individuals.
Follow the full paper here: Can Healthy Aging Boost Labor Supply? Evidence from Korea