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 October 2007 | ISBN: 9780226310176
Published online February 2013 | e-ISBN: 9780226310008 | DOI:
Do Elderly Workers Substitute for Younger Workers in the United States?

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One question that is often raised in international discussion is whether an increase in the labor supply of the elderly will lead to a reduction in the labor supply of young and prime age workers. A common view expressed in the international context is the “lump of labor” view that there are a fixed number of jobs, so that if more of those jobs are taken by the nonretiring elderly, there will be fewer such jobs for the young. This view is commonly disputed by economists, however, who argue that the labor market is not a fixed box but is rather a dynamic market that can adapt to large changes in labor supply. In the U.S. context, this view appears to dominate, as there has been little discussion of the “crowding out” of the young by older workers. This chapter investigates the extent of such “crowding out” in the United States over time. It begins by documenting time series trends in labor supply by age group. It then turns to a more formal regression analysis of those trends. Finally, it develops a measure of the variation over time in retirement incentives of the elderly and relates that to the labor supply of both the elderly and younger workers. Overall, the data suggest little substitution across these groups.

Keywords: labor force; labor market; labor supply; younger workers; older workers; employment; retirement incentives

Chapter.  5350 words.  Illustrated.

Subjects: Public Economics

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