Do Elderly Workers Substitute for Younger Workers in the United States?

Jonathan Gruber and Kevin Milligan

in Social Security Programs and Retirement around the World

Published by University of Chicago Press

Published in print April 2010 | ISBN: 9780226309484
Published online February 2013 | e-ISBN: 9780226309507 | DOI:
Do Elderly Workers Substitute for Younger Workers in the United States?

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The Social Security program has been the single biggest social insurance program in the United States for decades. This chapter opens up by documenting time series trends in labor supply by age group and then turns to a more formal regression analysis of those trends. It develops a measure of the variation over time in the incentives for retirement of the elderly and relates that to the labor supply of both the elderly and younger workers. The analysis of the labor market impacts of changing elderly labor force participation uses data from the nation's largest annual labor market survey, the Current Population Survey (CPS). The movements in elderly employment are negatively related to prime-aged employment. The positive relationship between the incentive index and unemployment—and the negative relationship of the index with employment—indicates that the incentive index is somewhat predictive of the labor market behavior of the elderly.

Keywords: social security; unemployment; labor market; incentive index; survey

Chapter.  5280 words.  Illustrated.

Subjects: Public Economics

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