Do Older Workers Squeeze Out Younger Workers?

This paper investigates the oft-repeated claim that delayed retirement by older workers will result in higher unemployment among the young, a claim which has garnered increased attention in the media in the United States and which drives retirement policy in China. Using 1977-2011 data from the Current Population Survey (CPS), the analysis explores both timeseries and cross-state variation, and employs state-level regressions and instrumental-variable models to determine the extent to which such “crowding out†exists in the United States. The estimates show no evidence that increasing the employment of older persons reduces either the job opportunities or wage rates of younger persons. The patterns are consistent for both men and women and for groups with different levels of education. Estimates using older male mortality rates as instrumental variables also produce no consistent evidence that changes in employment rates of older people adversely affect the employment (both intensive and extensive margins) and wage rates of their younger counterparts. If anything, the opposite is true. Despite the fact that the labor market downturn that accompanied the Great Recession was the most severe experienced in the post-war era, the effects of older persons’ employment on other segments of the labor market do not differ from those during typical business cycles. Finally, the analysis of Chinese data also finds that the employment of older people has no impact on labor market outcomes for other age groups.