Retirement Age Reforms and Worker Substitutability: Implications for Employment of Older Workers

Abstract

"This paper studies how labor demand factors - specifically worker substitutability and job‑specific skills - shape employment responses to a rise in the early retirement age. Using a regression discontinuity design, I exploit a 1999 German reform that eliminated the option for women to retire at age 60. Before the reform, older workers could exit voluntarily, thereby imposing turnover costs on firms. Afterward, firms were better able to retain less substitutable workers for whom turnover costs are higher. At the same time, the loss of early pension eligibility reduced workers’ outside options, allowing firms to offer lower wages, often through partial retirement." (Author's abstract, IAB-Doku) ((en))

Cite article

Badalyan, S. (2025): Retirement Age Reforms and Worker Substitutability: Implications for Employment of Older Workers. (IAB-Discussion Paper 14/2025), Nürnberg, 89 p. DOI:10.48720/IAB.DP.2514