Abstract

The Japanese government has increased pensionable age and implemented policies to keep elderly workers in the labor market longer to bolster the public pension system. These policies have raised concern about whether elderly employment negatively influences youth employment. Although many studies in advanced economies have found that elderly and young workers are complements rather than substitutes, studies in Japan have found a substitutive relationship by using aggregate or demand-side data. In this study, we investigate the effect of elderly employment on youth employment as well as graduates’ subsequent income, using individual and supply-side data. The treatment effect estimation results reveal that elderly employment has increased the probability of new graduates failing to find a full-time job and decreased their future income by 7–8%.