Aging Well: How Economics Can Improve Life in Later Years

Field Notes: Research Profile
Minjoon Lee, Economics

Through surveys and economic modelling, Minjoon Lee explores how individuals and governments can better prepare for the financial and caregiving needs of older adults.

Can you offer a “lay” description of your research topic?

My research mainly focuses on the issue of aging. The population is aging in many advanced economies. With increased longevity, households face various economic challenges. Most people expect to live for many years after retirement, and they need to be financially prepared to maintain their quality of life. With aging, physical health deteriorates, and at some point, individuals will need to constantly receive care from others for so-called activities of daily living (including eating, getting in and out of bed, bathing, etc.). They will need to plan ahead how they can and want to receive such care. Aging also comes with cognitive decline. With cognitive decline, people may lose the ability to make the right decisions for themselves. In particular, when they lose the ability to make financial decisions, they may fall victim to financial abuse or scams.  

My research studies how well households are prepared for these late-in-life issues and how to improve their preparedness. Most of my studies are based on household surveys, which I design with my colleagues, to learn about what people have done facing these challenges, what they plan to do, and what the remaining gaps are in their preparation. After gaining insights from the survey responses, I bring those data to economic models to design policies that can improve people’s well-being in late life.  

What piqued your interest in this topic?

Well, I am a person who loves to plan ahead for the future. There are people who like to set up saving goals for each year until retirement, and I am one of them. When I was setting up a spreadsheet with lifetime savings goals (which I am still using) during my Ph.D., my wife teased me by saying that I was planning for retirement even before getting my first job. 🙂 With my interest in this topic, I also became curious about how others are doing for their future, which naturally led me to this research topic.  

On the other hand, when I was doing my Ph.D., I was lucky to participate in a large survey project where we surveyed older clients at a large mutual fund company to learn about their retirement preparedness and motivations for savings. This opportunity allowed me to learn about the issues the aging population faces, and they all seemed important enough to study.  

What question were you hoping to answer in your research?

The eventual goal of all my research is to help improve the quality of life of many households in late life. This could be achieved by designing better policies. We cannot leave this just to the individuals, and there are many things the government can do to improve the situation, including a better design of pensions, better provision of elder care, finding ways to promote employment of elderly workers, etc. All these policies often come with higher public expenditures, and my research aims to find the optimal design of such policies that maximize the benefits per dollar of tax money spent.  

Improving the quality of life could also be achieved by affecting individuals’ behavior. Improper management of their financial assets, not fully utilizing the tools designed to help their financial well-being after retirement, and not understanding how much they need to have adequate health care in old age can all result in a lower quality of life at old age. In my research, I try to detect common mistakes among households using surveys and propose ways to fix them.  

What is something people would be surprised to learn?

One of my recent projects studied cognitive decline and how that affects financial decision-making. Using a survey, we found that many older individuals (aged 55 – 80 at the moment of the survey) are deeply concerned about losing the ability to make good financial decisions at some point and eventually doing harm to their own financial well-being. Some respondents used an analogy to driving—at some point, they should stop driving, but they may not notice when that point is once they have already significantly declined.  

A good way to protect themselves against such risks is to hand over control of their finances to someone they can rely on, such as family members, typically one of their children (particularly after being widowed), if they are reliable in terms of financial literacy and aligned interests. Somewhat to our surprise, we found that the survey respondents were mostly very confident that they have someone who can make decisions on their behalf if needed.  

What was more surprising was that, even with that support, they do not want to hand over control of their finances until they see a clear sign that their cognition has declined. This still exposes them to the risks of making mistakes. The desire to hold onto control could come from the desire to be one’s own agent while still capable. Given this tricky situation, we find that many individuals would appreciate it—and actually, be willing to pay quite a large amount of money—if there is a way to help them detect their decline (e.g., periodic tests on cognitive ability).   

What’s the biggest misconception about your research area?

Many people think that Economics is only about money. Decisions involving money are, of course, important subjects in Economics research. However, in economics, we study a much broader range of decisions people make, often those that do not include non-pecuniary factors. Examples of this include types of health care people want to receive at very old ages, as discussed in my answer to the next question.  

Any new projects that you’re excited about?

One of the new projects I am excited about is looking at robot caregivers. In Japan, many nursing homes now use robot caregivers to address the increasing demand for elder care and the lack of labor supply. There are many different types of robots, including those that help move patients from one place to another and those that communicate with residents so they feel less lonely. Though it is not common in Canada, some nursing homes have started experimenting with communication robots.  

With recent developments in AI, robot caregivers may seem to be a sensible solution to this critical issue—elderly health care—in aging societies. However, whether this is a good solution or not depends on how care provided by robots is seen by potential users. Some may think that care provided by robots is inhumane, particularly if residents are supposed to chat with robots instead of humans to feel connected. Some may, on the other hand, feel better if robots instead of humans help them with certain activities of life, such as bathing and toileting. There is no large-scale evidence of how potential users of elder care feel about robot caregivers. I am planning to launch a large-scale survey, both in Canada and Japan, to learn about people’s perceptions of robot caregivers so that we can shed light on how robots can be best used in addressing care shortages.  

What’s your favourite class to teach?

It is hard to choose one course, but if I had to, I would choose Econ 5029: Research Method course. This is a mandatory course for all the MA students in Economics. In this course, students are asked to produce their own research paper. Transitioning from a consumer to a producer of research is never easy, so this is a challenging course for students. But, in the end, students leave the classroom with outcomes of their own research, which can be a part of their CV and also may be a basis for their future research. Seeing new ideas from students every semester and discussing how to improve the proposed projects with the entire class is always a fun and rewarding experience.