Media Briefings

The Positive Effect Of Higher Pensions On Life Expectancy: Evidence From Union Army Veterans

  • Published Date: May 2011

Higher pensions not only improve the quality of life for beneficiaries but they can also substantially extend their lives. That is the central finding of research by Professor Martin Salm, published in the May 2011 issue of the Economic Journal.

Analysing historical US data for Union Army veterans in the early twentieth century, the study finds that higher pensions substantially increased longevity for all veterans, irrespective of their wealth and whether they lived in urban or rural areas. But the effects were largest for poorer veterans and those who lived outside big cities. Higher pensions also strongly reduced veterans’ mortality from infectious diseases.

Do higher pensions increase longevity? The study aims to answer this question based on historical US data for Union Army veterans at the beginning of the twentieth century. The results confirm that higher veteran pensions had a large positive impact on life expectancy. Receiving more generous veteran pensions from age 65 until death increased life expectancy by as much as 2.3 years.

Veteran pensions constituted the first large-scale old-age pension system in the United States. For some years, pensions for Union army veterans amounted to more than 40% of the federal budget and covered more than 900,000 beneficiaries. These pensions were generous by the standards of their time.

This study examines mortality trends for a sample of Union Army veterans for the period from 1900 to 1917. Veterans in the sample received a small pension in the year 1900. Pensions were substantially increased by the pension law of 1907 and increased further by the pension law of 1912. All veterans who had served in the army for a minimum of 90 days and were aged 62 or older were eligible for these higher pensions.

The study assumes that in the absence of pension increases, veterans would have faced the same trends in mortality as the general northern white male population of the same age. For veterans in this study, mortality rates in 1900 were very similar to life table mortality rates for the general white northern male population of the same age.

Union Army soldiers were also very similar to the general population in terms of average wealth, share of native-born Americans, geographical distribution and distribution of occupational groups. During the study period, there was no decrease in life table mortality rates at higher ages.

In contrast, this study finds a substantial reduction in age-adjusted mortality after the pension law of 1907 took effect, and a further substantial decrease in age-adjusted mortality after the pension law of 1912 took effect. This study interprets these reductions in mortality as a causal effect of pensions on lower mortality.

Veteran pensions reduced age-adjusted mortality by 11.5% for law of 1907 pensions and by 29.6% for law of 1912 pensions. These reductions in mortality were equivalent to an increase in life expectancy by 0.8 years for veterans who would have received a law of 1907 pension starting from age 65 until death, and to an increase in life expectancy by 2.3 years for veterans who would have received a law of 1912 pension starting from age 65 until death.

Pensions substantially increased longevity for all wealth groups and for both urban and rural populations, but the effects were largest for poorer veterans and for veterans who lived outside big cities. Pensions also reduced mortality from both acute and non-acute causes, but the reduction in mortality was strongest for mortality from infectious diseases. Higher veteran pensions decreased mortality from infectious diseases by around half of it.

The study shows that government transfers such as veteran pensions can not only improve the quality of life for beneficiaries, but also substantially extend their length of life. This relationship was already suspected by contemporaries. In 1889, General M. Trumball speculated that ‘nothing increases longevity like a pension’. Whether Trumball’s statement also applies to current conditions is a topic for future research.

ENDS

Notes for editors: ‘The Effect of Pensions on Longevity: Evidence from Union Army veterans’ by Martin Salm is published in the May 2011 issue of the Economic Journal.

Martin Salm is at Tilburg University in the Netherlands.

For further information: contact Martin Salm on +31 13 466 2426 (email: m.salm@uvt.nl); or Romesh Vaitilingam on +44-7768-661095 (email: romesh@vaitilingam.com).