Work Capacity at Older Ages in the Netherlands

Over the last two decades policy reforms in the Netherlands have increased work incentives, resulting in rising employment rates at older ages. Over the same period health of the population has increased as well. A natural question is how much people could work taking into account their health status. As the other chapters in this volume, we use two approaches to answering this question. The first approach takes the relation between mortality and employment in 1981 as a base and then estimates what employment rates could be in 2010 if the relation between mortality and employment were the same in 1981 and 2010. The estimated additional work capacity based on this approach is about 50 percentage points for males at age 65. A second approach estimates the relation between health and employment in the age interval 50-54 and then predicts employment at later ages using health at these later ages. This leads to an estimated additional work capacity in 2010 of more than 75 percentage points for males aged 65-74. When including mortality as an additional health indicator to control for unobserved health differences in the latter approach, the estimated work capacities are more in line with those from the former approach: about 53 percentage points for males aged 65-69 and 44 percentage points for males aged 70-74.