Does providing informal elderly care hasten retirement? Evidence from Japan

• Published date: 01 August 2018
• Date: 01 August 2018
• DOI: http://doi.org/10.1111/rode.12395
• Author: Yoko Niimi

SPECIAL ISSUE ARTICLE

Does providing informal elderly care hasten

retirement? Evidence from Japan

Yoko Niimi

Asian Growth Research Institute,

Fukuoka, Japan

Correspondence

Yoko Niimi, Asian Growth Research

Institute, 11-4 Ohtemachi, Kokurakita-ku,

Kitakyushu, Fukuoka 803-0814, Japan.

Email: niimi@agi.or.jp

Funding Information

This work was supported by JSPS (Japan

Society for the Promotion of Science)

KAKENHI Grant Number 15H01950, a

project grant from the Asian Growth

Research Institute, and a grant from the

MEXT Joint Usage/Research Center at

the Institute of Social and Economic

Research, Osaka University.

Abstract

This paper examines the implications of providing care to

elderly parents for adult children’s retirement plans using

micro data from a Japanese survey. We find no signifi-

cant effect of caregiving on family caregivers’planned

retirement age if we do not take into account caregiving

intensity but find a negative and significant effect on

retirement plans for intensive caregivers, particularly

among women. These findings suggest that relying on

family members to provide elderly care can pose a seri-

ous challenge to the ongoing efforts of the government to

promote the labor supply of women and the elderly as a

way of addressing the shrinkage of the working-age pop-

ulation in Japan. The estimation results suggest that

ensuring access to formal care services can help family

members reconcile their paid work with caregiving

requirements, thereby alleviating the adverse effect of

caregiving on their retirement plans. The results also sug-

gest that the financial burden of formal care services

could require caregivers to postpone retirement in some

cases.

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INTRODUCTION

One of the important costs of the increasing demand for elderly care caused by population aging is

a possible reduction in the labor supply of family caregivers.

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Caregiving can, in principle, affect

caregivers’labor market behavior at the extensive or intensive margins. Changes at the extensive

margin include quitting work temporarily or retiring early while changes at the intensive marg in

DOI: 10.1111/rode.12395

Rev Dev Econ. 2018;22:1039–1062. wileyonlinelibrary.com/journal/rode ©2018 John Wiley & Sons Ltd

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include adjusting work hours (for example by switching from a full-time to a part-time job), taking

on fewer responsibilities, and/or forgoing a promotion (Van Houtven, Coe, & Skira, 2013).

This paper examines adjustments at the extensive margin and pays particular attention to the

effect of providing care to elderly parents on the retirement plans of adult children. Given that the

demand for parental care provision tends to increase with age, it is possible that the need for adult

children to provide care to their elderly parents is concentrated around the period when retirement

is a possible option for labor market exit (Meng, 2012). Taking early retirement for caregiving rea-

sons can cause serious financial costs to caregivers as it is likely to affect their lifetime income not

only by making them forgo the income they could have earned until the mandatory retirement age

but also by reducing pension entitlements.

The main aim of this paper is therefore to contribute to a better understanding of the impact of

elderly care provision on family caregivers’retirement plans. It examines specifically the effect of

providing care to elderly parents on the planned retirement age of adult children using micro data

from Japan. While there has been a growing literature that analyzes the effect of providing elderly

care on family caregivers’labor market outcomes, the effect of caregiving on their retirement

behavior has been less explored not only in Japan but also in other parts of the world. In addition,

the increasing use of formal care services since the launch of a mandatory long-term care insurance

(LTCI) program in 2000 in Japan gives us an opportunity to examine whether the provision of for-

mal care services helps alleviate or eliminate any adverse effect of caregiving on family caregivers’

retirement plans.

Population aging is a pressing issue not only for advanced economies but also for developing

economies today. In particular, in many countries in Asia such as China, population aging is pro-

gressing relatively fast due partly to a significant decline in fertility rates. While the transition in

the age structure of population took the advanced economies of the West more than a century, it is

being played out over just a few decades in many countries in Asia (Asian Development Bank,

2011). The rapid pace of population aging and the fact that it is occurring at an earlier stage of

development give such developing countries limited time and opportunity to prepare themselves

for the needs of an aged society (United Nations Economic and Social Commission for Asia and

the Pacific, 2017). This is resulting in a situation where public old-age support, including support

for long-term care, is still underdeveloped and the heavy burden of old-age support is being borne

instead by family members. By analyzing the case of Japan, which shares with other Asian coun-

tries similar social norms including a relatively strong sense of filial obligation, this paper can shed

light on important issues that Asian countries need to take into account when preparing themselves

for the advent of an aged society.

The rest of the paper is organized as follows. Section 2 provides a conceptual framework for

analyzing the effect of elderly care provision on the labor supply of family caregivers. Section 3

briefly describes the current situation of elderly care in Japan. Section 4 reviews the relevant litera-

ture. Section 5 describes the data and estimation strategy. Section 6 presents estimation results.

Section 7 summarizes the main findings and discusses some policy implications.

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CONCEPTUAL FRAMEWORK

Empirical analyses of the employment effects of elderly care provision are based mainly on the

standard labor market participation decision where labor market participation is observed if and

only if the offered wage exceeds the reservation wage (Heitmueller & Inglis, 2007). It is thus

hypothesized that the effect of caregiving on labor supply will be the net impact of two opposing

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NIIMI