This paper examines the relationship between age-related cognitive decline and three potential workplace outcomes: 1) coping with increased job difficulty; 2) shifting to a less cognitively demanding job; and 3) retiring early. It uses data from the Health and Retirement Study (HRS) and the O*NET database. Critical components of the analysis are the metric used to measure cognitive decline, inclusion of cognitive reserve as an independent variable, and the use of overlapping 10-year observation windows. A key limitation is that the study cannot conclusively discern a causal relationship between cognitive decline and workforce exit.
The paper found that:
- About 10 percent of workers between the ages of 55 and 69 experienced steep cognitive decline over a 10-year period.
- Workers experiencing steep cognitive decline were more likely to “downshift” to a less demanding job or retire than workers experiencing no cognitive decline.
- Workers experiencing steep cognitive decline retired significantly earlier than planned, compared to workers who experienced no change in cognitive ability.
- Workers without cognitive reserves were more likely to exit the workforce and retire earlier than planned, compared to workers with cognitive reserves.
The policy implications of the findings are:
- Cognitive decline might prevent a significant minority of older individuals from working to their planned retirement ages, and thus should be considered when assessing reforms that incent delayed retirement.
- Policies that support “downshifting” to a cognitively less demanding job might help workers at risk of steep cognitive decline to remain in the labor force.
- Further research is needed to identify whether workers in specific occupations are more susceptible to age-related decline than others, and whether anything can be done to moderate the effect of age-related decline in work ability.