Some are Hit Hard, for Others It’s Business as Usual: The Effects of Chronic Illnesses on Employment and Income Trajectories

Abstract This study examines the relationship between the onset and progression of a chronic disease and subsequent income and employment trajectories using SHARE-RV, a longitudinal dataset that links survey data from the Survey of Health, Ageing and Retirement in Europe (SHARE) with German Pension Insurance administrative records (RV). This data linkage enables an assessment of the long-term consequences of chronic illness on labour market participation and income development, with observation periods exceeding 20 years. The empirical findings indicate that a chronic disease exhibit negative correlations with employment outcomes and earned income. These adverse effects differ in magnitude depending on the indicator used to define chronic disease and are most pronounced when restricting analyses to severe chronic conditions. Further, notable gender differences are observed. The spectrum of income losses ranges from moderate decreases in earnings points to the complete loss of earned income as a result of unemployment, labour market exit, or transition to disability pension receipt. The analysis also explores the extent to which chronic illness acts to intensify pre-existing labour market inequalities. The results indicate that the employment and income trajectories of highly qualified individuals are substantially less adversely affected by the onset and progression of chronic disease compared to those of individuals with low or medium levels of qualification. Indeed, highly qualified individuals may continue to accrue additional earnings points even following a chronic disease diagnosis. Consequently, chronic illness contributes to the amplification of social inequality within the labor market.