Sabanci University, Faculty of Arts and Sciences
Economics Seminar; Tuesday, September 26th
"Labor Market Rigidities and the Employment Behavior of Older Workers"
Department of Economics and Carolina Population Center
University of North Carolina at Chapel Hill
The labor market is often asserted to be characterized by rigidities that make it difficult for older workers to carry out their desired trajectories from work to retirement. In this paper we address
the following question: what is the association between the age composition of employment in an establishment and the propensity of older workers to separate from the establishment. In the
absence of a direct measure of labor market rigidity, we use the share of older workers in an establishment’s workforce as a proxy for the “older-worker-friendliness” of an establishment.
We argue that establishments with a relatively large share of older workers, other things equal,
are less likely to use technology or employment practices that result in labor market rigidities. As
a result, older workers are more likely to be able to carry out their desired trajectory from work
to retirement without separating from the firm. Our analysis uses longitudinal data on individuals
from the U.S. Survey of Income and Program Participation merged with data on their employers from the Longitudinal Employer-Household Dynamics files. We use a difference-in-difference
approach to analysis of the association between the age composition of employment in an
establishment and the rate at which workers of different ages separate from the establishment.
We find strong evidence that an older age structure of the work force at the establishment-level is
associated with a lower separation propensity of its older workers, relative to the separation
propensity of its younger workers. This finding is robust to many specification checks. These
results provide indirect but suggestive evidence of the importance of labor market rigidities.