Shocks, Institutions and Secular Changes in Employment of Older Individuals
Employment rates of males aged 55-64 have changed dramatically in the OECD over the last 5 decades. The average employment rate decreased by more than 15 percentage points between the mid-1970s and the mid-1990s, only to increase by roughly the same amount subsequently. One proposed explanation in the literature is that spousal non-working times are complements and that older males are working longer as a result of secular increases in labor supply of older females. In the first part of this paper we present evidence against this explanation. We then offer a new narrative to understand the employment rate changes for older individuals. We argue that the dramatic U-shaped pattern for older male employment rates should be understood as reflecting a mean reverting low frequency shock to labor market opportunities for all workers in combination with temporary country specific policy responses that incentivized older individuals to withdraw from market work.
We thank Mark Bils and Nir Jaimovich for comments, as well as conference participants at the NBER Macro Annual Conference and seminar participants at the Cleveland Fed. Wallenius thanks the Knut and Alice Wallenberg Foundation for financial support. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Richard Rogerson acknowledges financial support in excess of $10,000 over the last three years from the Federal Reserve Bank of Minneapolis, the Federal Reserve Bank of Atlanta, and the World Bank.