Longer Working Lives and Labor Demand

An NBER conference on Longer Working Lives and Labor Demand took place April 5 in Cambridge. Research Associate Kevin S. Milligan of University of British Columbia organized the meeting, sponsored by the Alfred P. Sloan Foundation. These researchers' papers were presented and discussed:

Courtney Coile, Wellesley College and NBER; Kevin S. Milligan, University of British Columbia and NBER; and David A. Wise, Harvard University and NBER

Social Security Programs and Retirement Around the World: Working Longer - Introduction and Summary

Giulia Bovini, London School of Economics, and Matteo Paradisi, Harvard University

Labor Substitutability and The Impact of Raising the Retirement Age

Substitutability among different types of workers may affect the impact of public policies by creating labor demand spillovers within firms. Using administrative data, Bovini and Paradisi study the substitutability between age cohorts in the context of a public pension reform that increased the full retirement age in Italy in 2012. They find that older workers delaying retirement and younger co-workers are substitutes. Labor demand spillovers cause almost the entire short-run fiscal cost of the pension reform. The researchers conclude that firm's behavior and labor substitutability have important implications for the impact of policies that lower the turnover of older workers.

Nicole Maestas, Harvard University and NBER; Kathleen J. Mullen, David Powell, and Jeffrey Wenger, RAND Corporation; and Till M. von Wachter, University of California, Los Angeles and NBER

The Value of Working Conditions in the United States and Implications For the Structure of Wages (NBER Working Paper No. 25204)

Maestas, Mullen, Powell, von Wachter, and Wenger document variation in working conditions among workers in the United States, present new estimates of how workers value these conditions, and assess the impact of working conditions on estimates of the wage structure and inequality. The researchers use evidence from a series of stated preference experiments to estimate workers' willingness-to-pay for a broad set of job characteristics, which they validate with actual job choices. The researchers find that working conditions vary substantially across workers, play a significant role in job choice decisions, and are central components of the compensation received by workers. Preferences vary by demographic groups and throughout the wage distribution. The researchers find that accounting for differences in preferences for working conditions often exacerbates wage differentials by race, age, and education, and intensifies measures of wage inequality.

Simon Jäger, MIT and NBER

Marginal Jobs and Job Surplus: A Test of the Efficiency of Separations (NBER Working Paper No. 24492)

Jäger presents a sharp test for the efficiency of job separations. First, Jäger documents a dramatic increase in the separation rate -- 11.2ppt (28%) over five years -- in response to a quasiexperimental extension of UI benefit duration for older workers. Second, after the abolition of the policy, the "job survivors" in the formerly treated group exhibit exactly the same separation behavior as the control group. Juxtaposed, these facts reject the "Coasean" prediction of efficient separations, whereby the UI extensions should have extracted marginal (low-surplus) jobs and thereby rendered the remaining (high-surplus) jobs more resilient after its abolition. Third, Jäger shows that a formal model of predicted efficient separations implies a piece-wise linear function of the actual control group separations beyond the missing mass of marginal matches. A structural estimation reveals point estimates of the share of efficient separations below 4%, with confidence intervals rejecting shares above 13%. Fourth, to characterize the marginal jobs in the data, Jäger extends complier analysis to difference-in-difference settings such as presented here. The UI-induced separators stemmed from declining firms, blue-collar jobs, with a high share of sick older workers, and firms more likely to have works councils -- while their wages were similar to program survivors. The evidence is consistent with a "non-Coasean" framework building on wage frictions preventing efficient bargaining, and with formal or informal institutional constraints on selective separations.

Francesca Carta and Francesco D'Amuri, Bank of Italy, and Till M. von Wachter, University of California, Los Angeles and NBER

Workforce Aging, Pension Reforms, and Firm Dynamics

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