Longevity science and the margins of labor supply

Condensed version of an essay I wrote for GENE 226 (Longevity Venture Capital) at Stanford.

Summary: Longevity science aims to flatten the human mortality rate curve such that mortality rates are relatively constant across ages. This implies that active life expectancy increases relative to total life expectancy. Economic models suggest labor supply responds by increasing at the extensive margin and decreasing at the intensive margin. To minimize unit labor costs and unused productive capacity, firms should accommodate flexible work hours and build support structures for older employees.

Aging, as defined by an exponential increase in age-specific mortality, is not a universal biological phenomenon. Hydra magnipapillata, for instance, have Type II survivorship curves: they exhibit constant mortality rates at all adult ages. Moreover, it has been shown that survivorship curves of Type I species can be manipulated by inhibiting default repression of various longevity pathways. Gonadectomy of sexually immature Kokanee salmon, which in natural conditions die after spawning as a result of hyperadenocorticism, extended the maximum lifespans of female salmon by 74% and male salmon by 69% [1]. Anti-aging efforts suppress default life-shortening mechanisms in humans as well as reverse other biochemical aspects of aging. This selective targeting results in a human mortality rate curve that slopes gently at old ages, absent side effects or novel disease at yet-unreachable ages.

Such a curve shift not only increases life expectancy but also relative active life expectancy (share of healthy years). One model predicts that under a delayed aging scenario 77% of adults over age 65 would live disability-free by 2060, while only 71% would live disability-free in the baseline [2]. While historically increases in total human lifespan have been accompanied by mild increases in share of healthy years, anti-aging technology will amplify this effect.

A large body of work has analyzed the means by which changes in life expectancy influences attitudes towards work. The Ben-Porath mechanism, introduced in 1967, argues that gains in life expectancy result in a rise in education due to an extended payoff period [3]. Hazan refutes the Ben-Porath mechanism in his study of working men born between 1840 and 1930, which shows that expected lifetime labor supply declined with average years of schooling [4]. A number of theories attempt to explain this data. For example, Strulik et al. develop a model that accounts for labor supply at the intensive margin by considering three demographics: the young, the working middle age, and the inactive old. The authors propose labor supply at the intensive margin decreases with active life expectancy (time spent in the middle age) and increases with time spent in inactive old age. Intuitively, this is because “if individuals expect to stay longer in middle age, they reduce labor supply per time increment because they expect to finance the same level of old age consumption with less labor supply per time increment” [5]. With their remaining time middle-aged employees satisfy their preference for leisure.

Given that longevity science increases active life expectancy, it should induce an increase in labor supply at the extensive margin because it extends the working period of life in the simplified model. Additionally, because longevity science increases relative active life expectancy, it should induce a decrease in labor supply at the intensive margin. In other words, workers will prefer to work fewer hours for more years.

Whether or not worker preferences for fewer hours are satisfied depends largely on employer work hour flexibility. A large discrepancy has existed historically between desired and actual work hours, with 3% to 30% of workers reporting perceived overemployment across various surveys. This effect may be driven by imperfect information or bounded rationality. Economics professor Lonnie Golden cites concentrated decision-making power at upper echelons where managers are unaware of employee work schedule preferences [6]. Business law professor Robert Bird considers institutional theory that predicts imitation between firms which favors established and legitimized practices like the nine-to-five, five-day work week [7]. When employer work schedule preferences do align with those of employees, firms benefit financially. Employees become more efficient for a number of reasons, including increased job satisfaction and the ability to satisfy other preferences without cutting effort on-the-job. One 11-year study of 33 pharmaceutical companies suggests that adoption of flexible work hours contributes to an approximate 10% increase in productivity [8]. Cooperative employers also experience reduced turnover, saving on recruiting overhead and costs associated with loss of institutional knowledge.

As relative active life expectancy increases over the next few decades, firms that stay attuned to the work time preferences of their employees may gain a competitive advantage. In particular, employers should permit shifts with minimal friction to reduced hours or part-time schedules. While some companies today have flexible working arrangements, many employees do not take advantage of them for fear of retribution through job loss or impaired career growth. Studies demonstrate that perceived usability of flexible work arrangements is crucially linked to work-life balance. In addition, disproportionate compensation losses associated with part-time status prevent workers from trading high pay for reduced hours, resulting in overwork. Employers should thus design better and more legible incentives for work hour reduction. They may also need to develop more efficient collaborative environments that make practices such as work sharing more effective, which has empirically struggled to raise employment levels.

Flexible work hours account for decreases at the intensive margin of labor supply. Employers additionally must prepare for an increasing number of older workers seeking employment opportunities to adjust for increases at the extensive margin. Failure to do so results in early labor force departure; in the past, retirement programs such as social security have created disincentives for continued work to the detriment of the economy at large and individual firms’ productivity [9]. 50 years after the passage of the Age Discrimination in Employment Act (ADEA), the U.S. Equal Employment Opportunity Commission (EEOC) reported that “despite decades of research finding that age does not predict ability or performance,” older works still face discrimination in the form of unlawful discharge, hiring bias, and denial of benefits. An audit correspondence study with 40,000 job applications found robust evidence of age discrimination: 19% of young applicants (ages 29-31) received callbacks while only 12% of old applicants (ages 64-66) received callbacks [10]. The marginalization of old workers does not serve strong business. Their relative experience, professional networks, and work ethic make them unique assets.

Firms can enhance work incentives in several ways. Correcting for discriminatory compensation is a first step: labor supply elasticities are much higher at old ages and therefore employers can expect recruitment of older workers to be relatively cost-effective [11]. In the workplace, it is important to foster a multigenerational culture that makes older employees feel welcome; this can be accomplished with educational campaigns and intergenerational contact. Reverse mentoring sessions are one such mechanism, in which a younger employee updates an older employee on matters of practical or cultural relevance. These sessions confer the additional benefit of inexpensive job training. Employers are often reluctant to offer older workers training due to declining cognition and approaching retirement. Whether or not age-specific job training is profitable or increases employability in general is unclear, but it is expected that cognitive health will persist at ages beyond what is common today. As such, employers who attend to the individual capacities of their employees as the bases for training will reap rewards in the form of productivity gains and retainment, especially in a rapidly evolving technological environment that demands constant reskilling. Increasingly older employees also facilitate invaluable explicit and tacit knowledge transfer. Employers can aid this process by offering phased retirement programs that enable greater continuity in role rotations and upend unpredictable retirements responsible for knowledge loss. Phased retirement can already leverage the lasting good health enabled by modern science: one AARP survey reported that 42% of existing older workers preferred a flexible transition into retirement [12].

As life expectancy and relative active life expectancy rise as results of advancements in anti-aging research, employers should anticipate preferences for shorter and more flexible work hours as well as longer careers. Preparation for this shift must begin early: pervasive problems like age discrimination are associated with gradual cultural changes, and designing flexible work arrangements requires experimentation and iteration. Upfront investments may be offset by lower labor costs in the long run.

References

[1] G. Fahy, Future of aging: Pathways to human life extension. SPRINGER, 2016.
[2] H. Beltrán-Sánchez, S. Soneji, and E. M. Crimmins, “Past, present, and future of healthy life expectancy: Figure 1.,” Cold Spring Harbor Perspectives in Medicine, vol. 5, no. 11, Nov. 2015.
[3] Y. Ben-Porath, “The production of human capital and the life cycle of earnings,” Journal of Political Economy, vol. 75, no. 4, Part 1, pp. 352–365, 1967.
[4] “Longevity and lifetime labor supply: Evidence and implications,” Econometrica, vol. 77, no. 6, pp. 1829–1863, 2009.
[5] H. Strulik and K. Werner, “Life expectancy, labor supply, and long-run growth: Reconciling theory and evidence,” SSRN Electronic Journal, 2012.
[6] L. Golden, “The economics of Worktime length, adjustment, and flexibility,” Review of Social Economy, vol. 54, no. 1, pp. 1–45, 1996.
[7] R. C. Bird, “Why don’t more employers adopt flexible working time?,” SSRN Electronic Journal, 2014.
[8] E. M. Shepard, T. J. Clifton, and D. Kruse, “Flexible work hours and productivity: Some evidence from the pharmaceutical industry,” Industrial Relations, vol. 35, no. 1, pp. 123–139, Jan. 1996.
[9] C. Coile, K. Milligan, and D. A. Wise, Social Security Programs and retirement around the world: Working Longer. Chicago: The University of Chicago Press, 2020.
[10] D. Neumark, I. Burn, and P. Button, “Is it harder for older workers to find jobs? new and improved evidence from a field experiment,” Journal of Political Economy, vol. 127, no. 2, pp. 922–970, 2019.
[11] R. L. Clark and J. B. Shoven, “Enhancing Work Incentives for Older Workers: Social Security and Medicare Proposals to Reduce Work Disincentives,” rep., Jan. 2019.
[12] H. Edleson, “Boomers want to work, transition to retirement,” AARP, 03-Apr-2019. [Online]. Available: https://www.aarp.org/retirement/planning-for-retirement/info-2019/work-transition-survey.html.