The impact of chronic diseases on labour market exit: a difference-in-differences approach

The prevalence of chronic diseases, also referred to as non-communicable diseases (NCDs), is rising worldwide, leading to an increasing number of people facing disabilities that impact their labour market participation. This study examines the effect of NCDs on labour market exit across European countries. Data on individuals aged 55 to their respective national retirement age were collected from the Survey of Health, Ageing, and Retirement in Europe (2004–2020) and analysed using a staggered difference-in-differences approach. Compared to their healthy counterparts, individuals with an NCD were 16% points (pp) more likely to exit the labour market early, losing an average of 3.6 working months. We also document a severity gradient: the probability of premature exit rises from 7 pp for mild conditions to 15 pp for severe diagnoses. The effect was consistent across most European countries, except for Estonia. In some cases, NCDs influenced the decision of labour market exit but had little impact on total working time. Among the countries analysed, Slovenia showed the highest early exit risk and greatest working time loss, followed by Belgium and Italy. Overall, the annual economic burden associated with lost working years due to NCDs is estimated at €136 billion. In conclusion, people with NCDs are more likely to stop working earlier due to disability. Rehabilitation measures targeting work outcomes should be better incorporated to support the participation of individuals in the labour market. Effective intervention can have a substantial return on investment, given the significant economic losses that impact individuals, their families, and the social and healthcare system.