Using a highly stylized dynamic microsimulation model, we project the labor force of the United States up to the year 2060
and contrast these projections with projections for Germany to assess differential effects on outcomes. The projections are
consistent with the US Census Bureau's and Eurostat's demographic projections. Our modeling approach allows to show and quantify
how policy changes the future size of the labor force, which we assess with a series of what-if scenarios. Both the USA and
Germany are expected to undergo demographic aging, but their demographic fundamentals differ starkly. This has strong implications
for their labor force developments. According to our microsimulation, the US labor force will, despite population aging, increase
by 16.2 percent in the age groups 15 to 74 (corresponding to 25.2 million workers) between 2020 and 2060, while Germany will
experience a decline by 10.7 percent (4.4 million workers). In these baseline projections, improvements in the education structure
will add about two million persons to the US labor force and about half a million persons to the German labor force by 2060.
In the what-if scenarios, we examine the implications of improvements in the educational structure of the population and of
policies which address the health impediments for labor force participation. Of the educational scenarios that we evaluate,
increasing the number of persons who achieve more than lower education has the strongest positive impact on labor force participation,
relative to the number of additional years of schooling implied by the various scenarios. Shifting people from intermediate
to higher education levels also increases labor force participation in higher age groups, however, this is partially offset
by lock in effects at younger ages. Our projections highlight that improvements in the labor market integration of people
with health limitations provide a particularly promising avenue to increase labor force participation rates and thus help
to address the challenges posed by demographic aging. If the health gap in participation rates in the United States were similar
to that currently observed in Sweden, the labor force in 2060 would be larger by about 14.9 million persons.
Many countries have reduced the generosity of sickness and disability programs while making them more activating – yet few
studies have examined how employment rates have subsequently changed. We present estimates of how employment rates of older
workers with poor health in 13 high-income countries changed 2004-7 to 2012-15 using HRS/SHARE/ELSA data. We find that those
in poor health in the USA have experienced a unique deterioration: they have not only seen a widening gap to the employment
rates of those with good health, but their employment rates fell per se. We find only for Sweden (and possibly England) signs
that the health employment gap shrank, with rising employment but stable gaps elsewhere. We then examine possible explanations
for the development in the USA: we find no evidence it links to labour market trends, but possible links to the USA's lack
of disability benefit reform and wider economic trends.
We analysed sickness and disability policies for the working-age population in a number of OECD countries, between the years
1990 and 2014. Existing evidence suggests that there has been a broad shift in focus from passive income maintenance to employment
incentives and reintegration policies. We have updated detailed policy scores provided by the OECD to estimate model-based
country clusters. Our results indicate that countries have pursued different types of reforms consisting of a combination
of integration and compensation measures. The reforms of recent decades have led to the emergence of a distinct cluster of
Northern and Continental European countries characterised by a combination of strong employment-oriented policies and comparatively
high social protection levels. An analysis of recent reforms shows a continued expansion of measures that foster employment
as well as instances of retrenchment in the compensation dimension. Diversity of policy settings across country groups, however,
remains substantial.
We analyse different disability policy strategies using policy scores developed by the OECD for the period 1990 to 2007. Applying
model-based and hierarchical agglomerative clustering, we investigate the existence of distinct country clusters, characterised
by particular policy combinations. In spite of common trends in policy re-orientation, our results indicate that the reforms
of the last two decades led to more, not less, heterogeneity between country groups in terms of sickness and disability policy.
A set of Northern and Continental European countries emerges as a distinct cluster characterised by its particular combination
of strong employment-oriented policies and comparatively high protection levels. A qualitative review of policy changes in
the most recent years suggests that the gap between these countries and the rest might have further increased. We embed our
empirical analysis in a theoretical framework to identify the objectives and the main components of a comprehensive disability
policy strategy. The objectives of such a strategy can be subsumed under three headings, representing strategy pillars: prevention
and treatment, protection and insurance, and activation and re-integration. Not all these dimensions are covered equally well
by the OECD policy scores and will have to be further investigated.
