Use it too much and lose everything? The effects of hours of work on health

In this paper, we extend the ‘use it or lose it hypothesis to analyze whether the negative effects of working hours eventually dominate the positive effects of work as the hours of work increase. Using panel data from the HILDA survey, we estimate the optimal hours of work for the health status of middle age and elderly workers. We deal with the potential endogeneity of working hours by using the instrumental variable estimation technique with instruments based on the age for pension eligibility. For males working relatively moderate hours (up to around 24–27 h a week), an increase in working hours has a positive impact on their health outcomes, but thereafter an increase in working hours hurts health outcomes. When weekly working hours exceed 50 h, an individual's health status is worse than when he is not working at all. How does work affect health? Is work bad for health? Does work have any health benefits?  Some papers examine the extensive margin of work (working or not working), for example, by examining the impact of unemployment and job loss on health outcomes. Using fixed-effect models for Australian, Canadian, and UK panel data, shows that the shift from being employed to being unemployed has adverse effects on mental health. On the other hand, using German data finds no significant effect of plant closures on various health outcomes. finds no immediate effect, but rather a delayed impact of retirement on mental health. Another stream of research on the extensive margin examines whether retirement has any impact on cognitive functioning and health. Overall, these studies tend to suggest that retirement hurts cognitive functioning, but has positive impacts on health outcomes.

Other papers examine the intensive margin of work, that is, the number of hours worked. The main focus of these analyses is on the effects of working long hours on various health outcomes.  Assuming that the injury risk is a quadratic function of working hours, they find that the function is convex, which indicates that shortening very long working hours could be effective in reducing the injury rate. However, previous studies do not examine the effects of moderate working hours on health, or the optimal number of hours worked. indicate that having a part-time job, as compared to a full-time job, has a positive impact on the health of people who are satisfied with their working hours. For males,  finds that compared to working full-time, working overtime leads to a worsening of mental health outcomes. This highlights the fact that the relationship between work and health may not be linear. Work can be a double-edged sword in that it can have both positive and negative effects. Interactions with people at work may help maintain an individual's cognitive functions and his/her mental health. Moreover, working individuals have more incentive to invest in health repair activities to be ‘fit’ in the labor market. On the other hand, long working hours can cause fatigue and stress on both physical and mental levels which potentially damage an individual's overall health and reduce the amount of time that can be invested in health repair activities. Most of the previous studies treat long working hours as a 0–1 dummy variable which defines long working hours as working more than 50 or 60 h per week. This means that they implicitly assume that long working hours have a constant shift effect on health status. They do not deal with the potential non-linear effects of working hours on health. The rest of this paper is organized as follows: Section 2 provides a brief description of the Australian pension system. Section 3 describes the data and Section 4 presents the empirical framework used in this paper. Section 5 reports the results of the estimation and discusses their implications. The last section concludes this paper.

Australian pension system

In Australia, the timing of retirement is closely related to the pension system. Retirement income consists of three sources: a means-tested public pension, a mandatory employer-contributed private retirement savings account, and voluntary private retirement savings. Since there is no mandatory retirement age in Australia, an elderly Australian can also continue to work to supplement his/her pension.

The maximum benefit payment from the public age pension is set at 25% of the male total average earnings. Since the introduction of the good and service tax in 2000, a supplement for compensation has been added to the payment. The maximum basic rates of the public pension were A$10,262.20 per annum for the standard rate and A$8,569.60 per annum for the partnered rate in September 2001. In September 2012, at the time of HILDA Wave 12, the maximum standard rate had been increased to A$ 18,512.00 and the partnered rate to A$ 13,954.20. It is important to note that the maximum benefit is subject to both an income test and an asset test.

Age and residency conditions are also applied for eligibility for an age pension. To satisfy the residency condition, individuals are required to have been residents in Australia for at least ten years. The age pension eligibility age for males was set at 65 in 1909. That is, for many Australians, the aged pension provides an important source of income.