IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/31797.html
   My bibliography  Save this paper

Deadwood Labor? The Effects of Eliminating Employment Protection for Older Workers

Author

Listed:
  • Emmanuel Saez
  • Benjamin Schoefer
  • David G. Seim

Abstract

We study the impact of mandatory retirement laws on employment and earnings of older workers in Sweden. Such policies are wide-spread but their empirical effects have remained elusive due to policy confounders such as pension incentives. In Sweden, mandatory retirement takes the form of a sharp and complete elimination of employment protection at age 67, which is totally independent from the pension system, allowing us to provide a clean causal analysis. First, on a per-capita basis, employment falls by about 10% and total average earnings (including zeros) by about 20% immediately at age 67 when employment protection is eliminated. Leveraging the recent increase in the age cutoff from 67 to 68, we show that these local immediate effects capture the full equilibrium response. Second, zooming in on separation effects, we find that 8% of jobs separate immediately due to loss of protection, with effects stemming from jobs with stronger initial employment protection (long tenure, firms subject to “last in, first out” rules), and those in the public sector. Separations appear involuntary to workers, with firms targeting plausibly unproductive workers (sick leave users). Third, we examine effects on continuing jobs. While wages are rigid to employment protection elimination, we uncover novel, sizable intensive-margin hours reductions, resulting in an 8% drop in earnings conditional on staying on the job. Hence, mandatory retirement laws affect elderly work significantly, along both the extensive and intensive margins.

Suggested Citation

  • Emmanuel Saez & Benjamin Schoefer & David G. Seim, 2023. "Deadwood Labor? The Effects of Eliminating Employment Protection for Older Workers," NBER Working Papers 31797, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:31797
    Note: AG LS EFG PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w31797.pdf
    Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marco Francesconi & Daniela Sonedda, 2024. "Does Weaker Employment Protection Lower the Cost of Job Loss?," CESifo Working Paper Series 11417, CESifo.

    More about this item

    JEL classification:

    • J0 - Labor and Demographic Economics - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:31797. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.