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Open Access Highly Accessed Research article

Economic impacts of illness in older workers: quantifying the impact of illness on income, tax revenue and government spending

Deborah J Schofield1*, Rupendra N Shrestha2, Richard Percival3, Megan E Passey4, Simon J Kelly3 and Emily J Callander2

Author Affiliations

1 NHMRC Clinical Trial Centre and Sydney School of Public Health, University of Sydney, Sydney NSW Australia

2 NHMRC Clinical Trial Centre, University of Sydney, Sydney NSW Australia

3 National Centre for Social and Economic Modelling, University of Canberra, Canberra, ACT, Australia

4 University Centre for Rural Health (North Coast), Sydney School of Public Health, University of Sydney, Lismore NSW Australia

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BMC Public Health 2011, 11:418  doi:10.1186/1471-2458-11-418

Published: 1 June 2011

Abstract

Background

Long term illness has far reaching impacts on individuals, and also places a large burden upon government. This paper quantifies the indirect economic impacts of illness related early retirement on individuals and government in Australia in 2009.

Methods

The output data from a microsimulation model, Health&WealthMOD, was analysed. Health&WealthMOD is representative of the 45 to 64 year old Australian population in 2009. The average weekly total income, total government support payments, and total taxation revenue paid, for individuals who are employment full-time, employed part-time and not in the labour force due to ill health was quantified.

Results

It was found that persons out of the labour force due to illness had significantly lower incomes ($218 per week as opposed to $1167 per week for those employed full-time), received significantly higher transfer payments, and paid significantly less tax than those employed full-time or part-time. This results in an annual national loss of income of over $17 billion, an annual national increase of $1.5 billion in spending on government support payments, and an annual loss of $2.1 billion in taxation revenue.

Conclusions

Illness related early retirement has significant economic impacts on both the individual and on governments as a result of lost income, lost taxation revenue and increased government support payments. This paper has quantified the extent of these impacts for Australia.