• A new study confirms that Obamacare will facilitate earlier retirements

    Nicholas Bagley and I previously covered job lock fairly extensively. (“Job lock” is the catch-all, labor market economist’s term for any situation that gives rise to workers working more or facing constraints in job mobility due to provision of work-related health insurance.) John Shoven and Sita Slavov have published the most recent work on the subject.

    We study the impact of retiree health coverage on the labor supply of public sector workers between the ages of 55 and 64. We find that retiree health coverage raises the probability of stopping full time work by 4.3 percentage points (around 38 percent) over two years among public sector workers aged 55-59, and by 6.7 percentage points (around 26 percent) over two years among public sector workers aged 60-64. In the younger age group, retiree health insurance mostly seems to facilitate transitions to part-time work rather than full retirement. However, in the older age group, it increases the probability of stopping work entirely by 4.3 percentage points (around 22 percent). […]

    Given the growing evidence that retiree health programs lead to earlier retirement, it is interesting to note that the Affordable Care Act (ACA) of 2010 offers what amounts to universal retiree health. Under the ACA, all retirees under 65 can now purchase health coverage through the state-based exchanges, and those purchases will be subsidized for all whose income in retirement is below 400 percent of the official poverty standard. The research on retiree health programs, including this paper, suggests that the ACA may lead to earlier retirements, particularly for those in the private sector who currently do not have access to subsidized health insurance in retirement before age 65.

    Prior work already suggested as much, but now the evidence base that the ACA will facilitate earlier retirements is even stronger.

    @afrakt

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