Long-term Care Coverage and Labor Force Participation of Older Workers

With an ever-aging population, the need for better Long Term Care (LTC) solutions is imminent. However, does a wide LTC coverage change the labor force participation of covered seniors and their caregivers? This paper is the first to answer this question by exploiting the launch of a near-universal LTCI. We found that policy-covered seniors decreased labor market engagement. Stronger effects were found among low-income workers, women, and those with fewer children. The forgone wages of the elderly accounts for 1.3% of GDP. Some of the loss of labor among the elderly is offset by the increased employment among their caregivers, specifically children. The net forgone wages amount to 0.51 percent of GDP.Disclaimer: The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of Dallas or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.