Health and Labour Market Effects of An Abrupt and Unanticipated Rise in Women Retirement Age. Evidence from the 2012 Italian Pension Reform

Population ageing is prompting governments around the world to increase the retirement age. However, not all workers may be equally able to extend their working lives as they may face adverse health consequences. In this article, we examine the health and labour market effects of an Italian pension reform that suddenly increased the normal retirement age for women by three to seven years. To do this, we use linked labour and healthcare administrative data, jointly with survey data and difference-in-difference methods. Our results show that the reform was effective in postponing retirement, as pension claiming dropped by 25 percentage points (pp) while the probability of working increased by around 11 pp during the ages 60 to 63. However, there were side effects as the reform also pushed a relevant fraction of women out of the labour market, into unemployment and disability pension, while increasing sick leaves among those who continued to work. The reform also increased hospitalization related to mental health and injuries among affected women. These side-effects were concentrated in the short-term and driven by those with previously low health status. Our results suggest that undifferentiated increases in pension age, independently of the health condition of the worker, might harm the health and the working capacity of more vulnerable workers