Worsening workers' health by lowering retirement age: The malign consequences of a benign reform

We analyze how a reduction in retirement age affects pre-retirement sickness absences and health problems. We examine a policy change in pension eligibility in the Swiss construction sector, which lowered retirement age from 65 to 60. While the reform was intended to improve workers' health, it resulted in the opposite outcome. We find that sickness absences for 56–60-year-old construction workers increase by 33% when working until 60 instead of 65, and their probability of self-reported health problems increases by 54%. We also find a negative but less pronounced effect for the 61–65 age group. Our results imply that lowering the retirement age has not only material costs but also unintended immaterial costs. If the effect is symmetric, it implies that increasing retirement age has immaterial benefits by improving pre-retirement health of older workers.