Aging & Social Change: Ninth Interdisciplinary Conference

Abstract

It is debatable whether or not increasing retirement age is beneficial for society and the economy. Some argue that in order to achieve the fiscal sustainability of social security, retirement-age reform is inevitable. However, opponents express their concerns that the growing number of retirement-age people in the workforce would worsen the unemployment of young people. This is an ongoing, long-lasting debate in many ageing societies, including Israel. Without rigorous understanding of the effects of later retirement, the attempts to raise the share of older workers in the labor market would aggravate the public’s fear on the unemployment of younger people. This study investigates the relationship between older and younger people’s employment. Data for this study are drawn from the National Insurance Institute in Israel, which cover the entire population of Israel. The analytical part is divided into two main sections. First, we examine the general trends of Israeli employment over time using time series analysis. Second, we develop econometric models using the instrumental variable approach to capture the relevance of simultaneity and the direction of the casual effects. A variable of the retirement-age reform is used as an instrumental variable. Through this analysis, we measure the potential effects of a change in the retirement age on retirement behaviors of older adults, and how it consequently leads to the employment of younger people. We conclude with several suggestions on the future research and policy implications for an age-friendly, sustainable society.