Understanding the Aging Workforce Defining a Research Agenda (2022) / Chapter Skim
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7 The Labor Market for Older Workers
7 The Labor Market for Older Workers
Pages 141-154
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From page 141... ...
On the supply side, the chapter considers the impact of the age structure of the workforce, that is, the larger relative cohort size of the older population owing to population aging. On the demand side, the following influences on the labor market for older workers are considered: automation; other technological change; globalization; immigration; and age discrimination against and stereotyping of older workers (considered in more detail in Chapter 6)
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From page 142... ...
From a policy perspective (see Chapter 8) , there may be a good rationale for trying to mitigate the influence of behaviors or economic changes that inhibit labor demand for or labor supply of older workers.2 This may be particularly important because, if current reforms fail to increase employment at older ages, the resulting fiscal strains may compel policy makers to enact even stronger or harsher policies to encourage older adults to delay retirement, including reducing Social Security benefits overall or further increasing the age of eligibility for full benefits.
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From page 143... ...
, find that these youths fare worse than those from smaller birth cohorts, at least initially; they earn lower wages and, as a result, have lower employment rates. These effects of a cohort's relative size are interpreted as "relative supply" or "cohort crowding" effects, in which a large cohort shifts out labor supply, leading to lower wages, and hence reductions in employment or labor force participation (due to the reservation wage effect)
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From page 144... ...
But when the older cohorts are large relative to the middle-range cohort of 25–49 year-olds, older workers experience higher labor force participation, although there is little evidence of a change in wages; results that are more consistent with a relative demand shift.5 As discussed in Chapter 2, over the first half of the twenty-first century, the age distribution of the United States is projected to see rising shares of 50–69 year-olds relative to the adjacent prime/middle-age group, rather than to the particularly small cohort of the youngest workers. As such, the results suggest that this population aging will likely lead to rising labor force participation and employment of older individuals.
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From page 145... ...
Effects on Retirement While automation has its direct effects on labor demand, labor supply responses can influence the impact of automation on the labor market for workers in general and older workers in particular. Likely the most important factor is the possibility of workers retraining for the new jobs that automation offers; conversely, automation may have adverse effects on older workers who are unable to modify their skills or do not find the necessary retraining profitable because of their relatively short time horizon in the labor market.
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From page 146... ...
Card and Lemieux (2001) attributed this to changes in labor composition, specifically in the relative supply of more-educated workers among different age cohorts.
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From page 147... ...
As discussed in greater detail in Chapter 6, many types of evidence suggest there is labor market discrimination against older workers, lengthening the durations of their unemployment spells. Moreover, this discrimination leads to more separations of older workers from their current employers, lower employment rates, slower wage growth, and reduced expectations of working past their mid-60s (Adams, 2002; Johnson and Neumark, 1997)
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From page 148... ...
Indeed, the paper is presented as providing evidence on how internal labor markets work.
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From page 149... ...
document that whereas in the past, in response to large negative shocks to local labor markets (mass layoffs) , the largest contributor to reductions in the labor force was through out-migration, but during and after the Great Recession growth in nonparticipation in the labor market became the primary source of adjustment.11 The combination of these forces has led to large and now persistent differences in rates of employment and nonemployment across regions.
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From page 150... ...
, Farber (2004) shows that the reemployment rates of displaced workers (those who lose jobs involuntarily for economic reasons)
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From page 151... ...
For example, the United States has American Job Centers that offer services to job seekers, including training referrals, career counseling, job listings, and similar employment-related services. To the best of our knowledge, there is no research on the effectiveness of these centers nor any material on efforts devoted to older workers, although the CareerOneStop website associated with the program that runs these centers does provide specific advice to older workers,14 and some centers appear to have a focus on older workers.15 The U.S.
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From page 152... ...
. Compared to younger displaced workers, older workers who experience a job loss take longer to find a new job, experience larger declines in earnings, and are more likely to exit the labor force (Farber, 2015)
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From page 153... ...
U.S. workers who experience a weak labor market in their late 50s and early 60s claim Social Security benefits earlier and have lower retirement income (Coile and Levine, 2011)
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From page 154... ...
There is evidence that some kinds of retraining -- like community college education in the United States and firm training subsidies in Germany -- boost earnings and employment, although the social returns may be relatively low if workers are relatively close to retirement. • Adverse economic shocks tend to result in less job loss for older workers but larger and more persistent earnings declines and more exit from the labor force when these job losses occur, which can spur early retirement.
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