Gender and Life Cycle Differentials in the Impact of Health on Labour Force Participation in Jamaica

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Gender and Life Cycle Differentials in the Impact of Health on Labour Force Participation in Jamaica Sudhanshu Handa* Monica Neitzert Differences in the impact of health on labour market participation
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Gender and Life Cycle Differentials in the Impact of Health on Labour Force Participation in Jamaica Sudhanshu Handa* Monica Neitzert Differences in the impact of health on labour market participation between women and men across age groups are analysed using Jamaican micro data. Although women report higher incidences of poor health, the impact of ill-health is larger for males than females. In contrast to most studies which focus on retirement alone, we find that poor health has a significant effect on the participation decision of both relatively young and old adults. Results are robust to an alternative measure of health status based on activities of daily living. These latter estimates indicate that while any health limitation affects the participation behaviour of males, only severe limitations affect the behaviour of females. Simulations show that the male-female participation gap is not explained by the lower health status of females, but rather the higher return to men s good health. The implications for investment in women s health is discussed. * Address for correspondence: Sudhanshu Handa, Department of Public Policy, CB#3435, University of North Carolina, Chapel Hill, NC This paper was written when Handa was a Lecturer, and Neitzert a visiting Lecturer, in the Department of Economics, University of the West Indies, Mona, Jamaica. Our thanks to the Planning Institute of Jamaica for the use of the Jamaican SLC data set. The authors gratefully acknowledge Bill Milne, Al Berry, Dwayne Benjamin, Michael Baker, Dipak Mazumdar, Morley Gunderson, and seminar participants at the University of Miami for constructive comments. An earlier version of this paper was presented at the 1997 Commonwealth Caribbean Medical Research Council Annual Conference in St. Maarten. All remaining errors are due to our own oversight. Gender and Life Cycle Differentials in the Impact of Health on Labour Force Participation in Jamaica Abstract: Differences in the impact of health on labour market participation between women and men across age groups are analysed using Jamaican micro data. Although women report higher incidences of poor health, the impact of ill-health is larger for males than females. In contrast to most studies which focus on retirement alone, we find that poor health has a significant effect on the participation decision of both relatively young and old adults. Results are robust to an alternative measure of health status based on activities of daily living. These latter estimates indicate that while any health limitation affects the participation behaviour of males, only severe limitations affect the behaviour of females. Simulations show that the malefemale participation gap is not explained by the lower health status of females, but rather the higher return to men s good health. The implications for investment in women s health is discussed. 1 1. Introduction The study of gender differences in labour market outcomes and their causes has become an important topic in economics research. This paper investigates the link between two widely observed gender differences that are generally accepted as fact: (1) women s lower (relative to men s) labour force participation rate, and (2) women s relatively poorer health status despite greater average longevity. These patterns are observed at the aggregate level in virtually all countries (UNDP 1995; UN 1995). Using Jamaican micro data we explore whether women s poorer health may be one factor explaining their lower rate of labour force participation. A fairly substantial body of evidence now demonstrates the existence of a causal link between good health and labour productivity (Strauss and Thomas 1995; Schultz and Tansel 1992; Pitt and Rosenzweig 1986; Strauss 1986; Edmundson and Sukhatme 1990; Herrin and Rosenfield 1988; Schoenbaum 1995). In addition new research suggests that among the poor, health investments rise with income (Strauss and Thomas 1995). The return to health investments is likely to be especially high in occupations -- such as physically demanding jobs -- in which health or productivity is observed. If the distribution of such jobs differs by gender we would expect a gender differential not only in the impact of physical health on labour force participation but also in health investments. Jamaica is a useful case study for the exploration of gender differences in the impact of health on labour market outcomes because it exemplifies a middle income economy that has achieved high income country level health indicators and labour force participation rates. Women account for 46 percent of the adult labour force in Jamaica (a slightly higher share than in either the UK or US), and life expectancy at birth is comparable to that in developed regions 2 (74 years in Jamaica compared to 76 years in the UK and US) although women s longevity advantage is slightly lower in Jamaica. Despite these advances, however, the occupational structure of the economy remains predominantly labour intensive and is significantly gender segmented (see section 3). The link between adult physical health status and labour force participation is of policy relevance to budget constrained public health care systems in Jamaica and elsewhere that must respond to the changing health care needs of the society. But gender differences in this relationship are particularly important in Jamaica because of its very high female labour force participation rate, the significant role women play in the maintenance of their families (manifested by a rate of female headship of over 40 percent), and the institutional features of the local labour market which result in high female unemployment, gender based occupational segregation and wage discrimination (see section 3). Moreover, even in developed countries where female participation in the formal labour market is highest, there are very few studies that consider the impact of health on women s labour force participation behaviour 1, and most of the existing work focuses on older adults and the effect of health status on the retirement decision (e.g. Bazzoli 1985; Anderson and Burkhauser 1985). This paper thus adds value to the broader literature on health and labour force participation by exploring gender differences in the impact of physical health on labour force participation, and by analysing this relationship for all women and men aged instead of just the retirement age group. We find the contemporaneous correlation between poor physical health and labour force 1 We found only two such studies--loprest, Rupp and Sandell (1995) using the United States Health and Retirement Survey and Santiago and Muschkin s (1996) investigation of disability and labour force participation among pre-retirement workers using the same data set. 3 participation to be negative and significant, and that this correlation is stronger for men than for women even though women tend to report being in poorer health than men. There is variation in the relationship between health and labour force participation by age group, with the biggest impact occurring among the young (age 20-40) and old (age 65-75) and again this relationship is more pronounced for men than women. Our results are robust to choice of health measure. When (possibly more objective) activities of daily living measures are used instead of self-reported general health, differences between men and women persist: while limitations of any kind have a significant quantitative impact on male labour force participation, only severe limitations affect female participation. We find that women s poorer health status does contribute somewhat to their lower rate of labour force participation. Although women in poor health leave or join the labour force less readily than do men, the poor health effect on women s participation is still negative. In addition women in good or very good health are more likely than men to be in the labour force. The smaller portion of women reporting very good or excellent health and the higher share of women in fair or poor health thus imply, all else equal, a lower average female labour force participation rate. The poorer health status of Jamaican women may be the result of under-investment reflecting lower returns to women s health in the occupations in which they tend to be concentrated. 2. Data, Sample and Health Measurement a) Data and sample The Jamaican Survey of Living Conditions (SLC) is a nationally representative household survey designed after the Living Standards Measurement Surveys of the World Bank, and is described in detail in Grosh (1993). Information on individuals 15 years and older in the 4 SLC was merged with the Labour Force Survey (LFS) taken one month before the SLC to observe respondents labour market activity. Although the SLC has been taken annually since 1988, the second round of the 1989 survey featured a comprehensive study of physical health conditions and is thus a unique data source for addressing the question at hand. This data set has been used in two recent and related papers: one analyses the determinants of adult physical health in Jamaica (Strauss, Gertler, Rahman and Fox 1993), while the other investigates how quality of medical care impacts labour force behaviour (Lavy, Palumbo and Stern 1996). The latter work, though related to our own (in that it also estimates labour force participation models with physical health as an explanatory variable), does not focus on the impact of health on participation, nor does it investigate gender differentials across age groups in this relationship, which are the primary tasks of the present paper. 2 Our sample contains the set of observations on men and women who were either in the labour force (employed or unemployed) or not in the labour force, and who were 15 to 80 years old at the time of the survey. Since the LFS only provides categorical information on hours worked we concentrate on the participation decision instead of hours of work. Initially we intended to focus on adults under age 65 (the legal retirement age in the public sector in Jamaica) but since the participation rate is quite significant for adults even in their 70s (see Figure 1, Section 3a), we expanded our sample to include everyone aged 15 to 80 (a total of 6140 individuals). 3 2 Specifically, Lavy, Palumbo and Stern (1996) investigate how the quality of health care, through its impact on health status, affects participation behaviour. 3 The SLC contains 8327 individuals in our age group of which only 92 percent were successfully merged with the LFS. We exclude 13 percent who were currently unemployed and approximately 100 observations with missing values for partner s status, health and schooling. 5 b) Health measures in the Jamaican SLC Two types of health status measures are provided in the 1989 SLC. The first measure is a self-reported assessment of the respondent s general health status with five possible categories: excellent, very good, good, fair, poor. The second measure relates to physical functioning, or activities of daily living (ADLs). The ADLs capture the respondent s degree of limitation in performing increasingly more basic daily endeavours: vigorous and moderate physical activity, walking uphill, bending, walking a mile, walking 100 yards and personal care. 4 The categories for the ADLs are: limited a lot, limited a little, and not limited at all. The seven ADLs are divided into two indices of limitation corresponding to activities which are less and more limiting for independent living when they cannot be performed. The first, less severe index, contains information about limitations in vigorous and moderate activity, walking uphill and bending. The second, more severe index, measures limitations in walking one mile and 100 yards, and in daily activities. 5 Each index contains a series of three dummy variables representing the ADL categories. Thus the limited a lot category takes the value of 1 whenever the respondent reports being limited a lot in any of the activities contained in the respective index. The resulting series of health variables are not mutually exclusive. [Table 1] Summary statistics on these indices are reported in table 1. Notice that women report being in poorer health than men, a result which persists in a multivariate context (Strauss et al. 4 Examples of activities are: eating and bathing for personal care activities; moving a table or home repairs for moderate activities; and running, lifting heavy objects, and doing hard labour for vigorous activities. 5 Our results did not change when we included bending in the more limiting index. 6 1993). For example, 11.5 percent of men in the sample report being in poor or fair general health compared to 16.6 percent of women (the difference in the distribution of men and women by general health status is statistically significant). c) Measurement issues 6 Studies investigating the role of health as a determinant of labour market behaviour require a measure of health status that is valid, reliable, and exogenous to the behaviour it is hypothesized to explain (Chirikos 1993). Content validity is thought to be higher for more narrowly focused (like the individual ADLs) than generic (such as general health status) measures of health (Patrick and Deyo 1989). 7 Murray and Chen (1992) are critical of selfreported measures because of their sensitivity to questionnaire wording and to the age, sex, race, culture and occupation of the respondent. Bound (1991), on the other hand, proposes that selfreported general health more accurately measure an individual s perceived capacity to work than physician diagnosed morbidity measures. Construct validity of generic health status measures has been established, but that of other measures is less well established (Patrick and Deyo 1989). Patrick and Deyo (1989) report that the reliability of generic measures is high but that up to 1989 there had been no published comparisons of the reliability of generic and other health measures. Manning et al (1982) concur that more comprehensive measures of health, such as composite or generic variables, are more reliable. Reporting inaccuracies are thought to be high in self-reported relative to physician 6 This section is based on the discussion in Handa and Neitzert (1997). 7 Patrick and Deyo (1989) compare generic measures such as quality of well-being measures, measures of multiple dysfunction and measures of multiple components of health with measures of specific chronic diseases (cancer, arthritis, etc). 7 diagnosed measures. Individuals may not be aware of health limitations that do exist or they may incorrectly diagnose a limitation which is not present. Such measurement error may result in large residual errors in regressions and coefficient estimates may be insignificant. Further, if health limitations are generally under-reported (likely among the poor) then the impact of health on labour force withdrawal is likely to be underestimated (Bound 1991). Behrman (1990) reports that self assessments of health understate health problems among the poor. Exogeneity from labour market behaviour and independence from other factors determining labour market status are other desirable properties of health status measures. Chirikos (1993) points out that a considerable body of literature suggests that the presence of specific health limitations may be associated with certain occupations. Alternatively, because good health positively affects market wage, demand for health rises with the rate of return to health investment (Lee 1992). Furthermore, many recent studies posit that, due to eligibility for disability programs, self-reported general health status is affected by labour force status. Bound (1991) suggests that those out of the work force may be systematically more likely to report health problems (regardless of disability program eligibility). Such endogeneity may result in exaggerated estimates of the impact of health on labour force behaviour. There are several reasons to believe that the ADL measures in the Jamaican SLC are less prone to endogeneity than self-reported general health measures for Jamaica, and than similar variables in established market economies. First, it seems more likely that if respondents are going to justify retirement as resulting from a health problem, they are more likely to report poor general health than to report a particular activity limitation which could, in theory, be tested by the interviewer. Second, public disability programs exist in Jamaica (section 3), but -- unlike the 8 situation in many established market economies -- benefit levels are too low to induce labour market withdrawal. Finally, some studies report that endogeneity is a smaller problem than measurement error (e.g. Stern 1989) and thus that coefficient estimates suffer more from underestimation than from exaggeration. However, this does not imply that for certain groups endogeneity is not a problem. For example, because the wealthy have better access to pensions, the coefficient on the health variable may be overestimated if pension is not separately controlled. Using both self-reported general health as well as the ADL measures permits a check on some of these endogeneity and measurement error issues. If the ADL measures are a less noisy measure of work capacity because they directly capture physical disability then we would expect their estimated impact on labour force behaviour to be larger than the estimated impact of selfreported general health. On the other hand if the endogeneity problem associated with selfreported general health is large, than the estimated impact of general health will be greater than that of the ADL indexes. Our model controls for economic inducements to exit the labour market when health is poor by incorporating a measure of household resources (as discussed in section 4) The Jamaican Setting a) Labour market Jamaica gained independence from British colonial rule in Upon independence Jamaica followed a development strategy of import substitution until the late 1970s when 8 In addition, we tested the endogeneity of the general health status variable using a method proposed by Rivers and Vuong (1988). The test result was insignificant; results are available from the authors. 9 external disequilibrium brought about policy reform. With a current population of 2.4 million (47 percent rural) and 1992 per capita GNP of $1,340 the Jamaican economy is now largely export oriented. In 1992 alumina and bauxite accounted for over one half of merchandise export receipts and about 22 percent of GNP; tourism receipts represented another 31 percent of GNP. Reflecting the dualistic structure of the Jamaican economy dating from the colonial era, the labour force is now concentrated largely in services (61 percent of employment) and agriculture (27 percent). Compared to the U.S. economy, Jamaican agriculture and services are much more labour intensive whereas mining and manufacturing are of comparable capital intensity (World Bank 1994a). The distribution of income in Jamaica, driven partly by wage rates, reflects this duality in a Gini coefficient for income of 0.49 (Handa and King 1997). The low average income in Jamaica coincides with a high labour force participation rate for both men and women. The participation rate for women aged 15 and above was 70.0 percent in 1989; for men in the same age group the rate was 86.1 percent. Figure 1 shows the participation rate for women and men included in the 1989 Labour Force Survey of Jamaica, and the male-female participation rate gap which ranges between 10 and 50 percentage points. The participation-age profile for women is always lower, and female withdrawal from the labour force occurs somewhat earlier, than for men. Female participation in Jamaica continues to generally increase, albeit more slowly, during child-bearing years (u
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