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The relationship between elderly employment and youth employment: evidence from China

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  • Zhang, Chuanchuan

Abstract

Retirement system reforms such as postponing retirement age in law are needed in China because of its rapid population aging. The overquick aging will result in both shortage of labor force supply and incubus of the social security system. The Chinese government acknowledged the negative influences of population aging, but finally decided to maintain the retirement age in law unchanged. The reason, as claimed by the policy makers and many socio-economic scholars, is postponing retirement age in law in China will crowd out youth employment. Unfortunately, no empirical evidences are provided, although the claim is critical to the potential retirement system reform. In this paper, we firstly address the validity of this claim. Using micro data from China’s 1990 and 2000 census and the 2005 1% population sample survey, we provide the first piece of evidence on the relationship between elderly employment and youth employment in China. Our OLS estimation results suggest that employment rates of younger persons are positively rather than negatively associated with employment rate of older persons. We further tried to identify a causal relationship by using two-way fixed effects and TSLS estimation strategies and found results consistent with our OLS estimation. Finally, we examine whether employment of older persons hurts the youth at the intensive margin by estimating the impact of elderly employment on younger workers’ monthly wage and still found a positive rather than negative effect. In short, the claim that postponing the retirement age will hurt the youth cannot be supported by empirical evidence. Although our empirical results are tentative, we view this paper as an important try to provide the first piece of evidence on the potential impact of retirement reform on youth employment and as suggesting further empirical studies on the claim that postponing retirement age will hurt the youth.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 37221.

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Date of creation: Mar 2012
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Handle: RePEc:pra:mprapa:37221

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Keywords: Retirement Reform; Elderly Employment; Youth Employment;

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  1. Adrian Kalwij & Arie Kapteyn & Klaas de Vos, 2009. "Early Retirement and Employment of the Young," Working Papers, RAND Corporation Publications Department 679, RAND Corporation Publications Department.
  2. Kapteyn, Arie & Kalwij, Adriaan & Zaidi, Asghar, 2004. "The myth of worksharing," Labour Economics, Elsevier, Elsevier, vol. 11(3), pages 293-313, June.
  3. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain The Rising Return To College For Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 116(2), pages 705-746, May.
  4. Tom Walker, 2007. "Why economists dislike a lump of labor," Review of Social Economy, Taylor & Francis Journals, Taylor & Francis Journals, vol. 65(3), pages 279-291.
  5. Jonathan Gruber & Kevin Milligan & David A. Wise, 2009. "Social Security Programs and Retirement Around the World: The Relationship to Youth Employment, Introduction and Summary," NBER Working Papers 14647, National Bureau of Economic Research, Inc.
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