SMU SOE Seminar Series (May 6, 2026): Labor Supply and Wages over the Life Cycle: Human Capital, Health, and Disability Benefits

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ABSTRACT

Although work experience has been found to be a key determinant of work and wages for educated women, it was found to play a smaller role for less educated men and women. Instead, welfare, tax credits, and family composition are more important, and increasingly, participation in disability programs. Here we document how labor supply, wages, health, and disability claims have evolved in the UK over the last three decades and examine how reforms to tax credits, disability benefits and other welfare programs have changed work incentives over this period. Introducing these features into an empirical structural dynamic model of life-cycle labor supply, health and disability benefit application, we examine the interactions between experience capital and health capital in driving life-cycle earnings across different education groups. Based on a panel sample of working age women in the UK, our results highlight the importance of interactions in the disability benefit, welfare and tax-credit systems for understanding the life cycle pattern of hours, employment, earnings, and disability claims, as well as for examining policy counterfactuals.