Does a higher retirement age reduce youth employment?

Abstract

SUMMARY Pension reforms rising minimum retirement age force some senior workers to retire later than originally expected. We evaluate the impact of a 2011 Italian reform, implemented during a recession, on youth and prime-age employment. Our research design is based on difference-in-differences and exploits the variations in the intensity of the treatment across local labour markets due to differences in the age structure of the population. We estimate that, for any 1,000 local senior workers locked into employment by the reform, local youth and prime-age employment declined by 273 (−0.86%) and 199 (−0.12%) workers, and senior employment increased by 833 (+2.70%) individuals. The estimated reduction in youth employment is broadly similar to the one induced by earlier reforms, implemented when the economy was growing. We estimate that an important part of the total employment change induced by the 2011 reform is due to higher firm turnover.