Effects of informal caring on labour market outcomes of carers: Evidence from HILDA

This study examines the causal impact of informal caregiving on labour market outcomes and well-being using data from the Household, Income and Labour Dynamics in Australia (HILDA) survey. We combine an event study design with an instrumental variable (IV) strategy, leveraging exogenous variation from serious illness or injury to a family member. Event study results show that health shocks significantly increase informal caregiving, with particularly large effects for women and older individuals. These shocks also lead to reductions in employment among these groups, as well as declines in hours worked, worsening mental health, and increased reliance on government support and early retirement. To isolate the causal effect of caregiving, we instrument caregiving with the timing of the health shock. IV estimates indicate that assuming caregiving responsibilities leads to large reductions in labour supply—weekly work hours fall by 9.7 h for main carers and up to 22.5 h for carers of partners. Our findings highlight the substantial economic costs of informal caregiving, with important implications for labour force participation in an ageing society.