Aging and Work Capacity

Declining health with age can limit individuals' work capacity, increasing the likelihood of mismatch between their abilities to perform certain tasks and the minimum demands of the jobs available to them. Traditional measures of health status are insufficient for understanding how labor supply outcomes are influenced by the match between individuals' abilities and job demands. We use unique survey data on individuals' self-reported ability levels, harmonized with occupational ability requirements from the O*NET database, to develop a new measure of work capacity. We find that average abilities overall and across different domains are high relative to average occupational demands. At the same time, age-related declines in abilities are modest, at least through age 70. Putting these elements together, individuals' work capacity is relatively stable with age. Finally, we show that our measures of work capacity are predictive of current and expected future labor supply outcomes, with and without controls for standard health variables.