Retirement and late-career choices depend not only on personal and policy factors but also on environmental conditions shaping daily life and work
Population ageing and increased longevity shift the balance between those paying into a pay-as-you-go system and those drawing benefits. An increase in the “old-age dependency ratio” with shrinking numbers of contributors, exacerbated by higher benefits and administrative costs, have placed growing fiscal pressure on pension funds and social security systems. These developments threaten fiscal sustainability and intergenerational fairness, putting debates about reforms of the minimal retirement age and program design center stage: how to support longer, healthier working lives, protect vulnerable groups, and ensure benefits remain reliable.
Most people view retirement as a personal choice shaped by financial readiness, job satisfaction, prevailing legislation, and individual aspirations. However, retirement and late-career decisions are not determined solely by personal or policy factors; they also respond to environmental conditions that shape daily life and work opportunities. Among these, temperature has become more and more important. Climate change has increased the frequency of extreme weather events, disrupted daily life, and affected people unequally depending on their capacity to adapt.
Why would temperature matter for a decision as important as leaving the labor force? Because our bodies are on the front line of climate. Extreme heat and cold place sustained stress on our bodies’ core systems, and aggravate underlying health conditions. For older individuals, who often have chronic health issues, those stressors can turn a difficult day at work into a tipping point to leave the workforce.
Drawing on detailed US survey data linked to daily local temperatures, we show in our recent IZA Discussion Paper that exposure to very hot and very cold days increase retirement transitions, especially for those who are not used to such extreme temperatures and those already facing health or access-to-care challenges. We show that the health mechanism is central for these results. Episodes of extreme temperatures are followed by higher incidence of cardiovascular disease and strokes. These are not abstract medical events; they are shocks that reduce a person’s capacity to keep working. Faced with these emerging limitations, individuals retire more frequently.
Can governments address the negative implications of extreme temperatures? We show that access to healthcare acts as a crucial buffer. Where care is easier to reach and afford, the same temperature shocks are less likely to push people into retirement. Hence, the labor market consequences of climate extremes are not automatic but can be softened by the right policies. In particular, expanding access to health care, especially in vulnerable areas, would improve population health and enable individuals who wish to keep working to remain longer in the labor force.
Climate change is often framed around storms, rising sea levels, and other disasters. Our findings suggest another lens: weather shapes our capacity to participate in the labor market as we age. If we want longer and healthier working lives, we cannot leave temperature out of the conversation. The good news is that adaptation and access to care make a difference. While we cannot control the weather, we can control how prepared we are to live and work in it.
© Andrea Albanese, Olivier Deschenes, Christina Gathmann, and Adrian Nieto Castro
Andrea Albanese is Research Scientist at Luxembourg Institute of Socio-Economic Research (LISER), Luxembourg, and IZA Research Fellow
Olivier Deschenes is Professor of Economics at the University of California Santa Barbara, US, and IZA Research Fellow
Christina Gathmann is Director of the Labor Market Department at the Luxembourg Institute of Socio-Economic Research (LISER), Professor of Economics at the University of Luxembourg, and IZA Research Fellow
Adrian Nieto Castro is Assistant Professor and Browaldh Scholar at the Department of Economics at Lund University, Sweden, and IZA Research Affiliate
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We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.
Related IZA World of Labor content:
https://wol.iza.org/articles/the-complex-effects-of-retirement-on-health by Andreas Kuhn
https://wol.iza.org/articles/retirement-plan-type-and-worker-mobility by Colleen Flaherty Manchester
https://wol.iza.org/articles/temperature-productivity-and-income by Olivier Deschenes
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