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 wide LTC coverage change the labor force participation of covered seniors? This paper is the first to answer this question by exploiting the launch of a pilot LTC insurance program. We find that policy-covered seniors decreased labor market engagement. We find stronger effects among low-income workers, women, and individuals with fewer children. The forgone wages of the elderly account for 1.3% of GDP. Some of the loss of labor among older workers is offset by the increased employment among the caregivers of the disabled, specifically children. The net forgone wages amount to 0.51% of GDP.