Will the baby boom retirement be a boon for the young?

Quick answer:

No, despite the large size of the boomer cohort relative to today’s new school leaver population, the boomer retirement will in fact be gradual, not sudden, according to my estimates using age-specific employment/population ratios. All too many Japanese continue working until age 70 and beyond, and so on average firms won’t be left short-handed and need to turn to the young, or at least not quickly. There will be no Year 2013 effect [which is when the youngest boomers, the 1948 cohort, turn 65].
Details and qualifications:
  1. labor economics work suggests that old and young workers are not perfect substitutes, indeed they may be complements (though that’s hard to check empirically as common shocks can produce both lower old-age and lower young-age employment). this is termed the “lock box” effect.
  2. measures are for headcount — employed — versus hours worked. since older workers tend not to work full time, my calculations may understate the retirement effect. however, at present there are also many underemployed (and not just unemployed) youth, so by focusing headcount I overstate employment levels at the young end, too.
  3. the data! — I basically need to recheck my spreadsheet from beginning to end as I made many changes as I went along. my calculations may simply be wrong! so graphs to follow…
Addendum:
Government policy is to encourage firms to keep older Japanese working, by making the retirement age older (target age 65 instead of the current mode of age 60), by re-employing retirees (under fixed-term contracts, eg to age 65), and by placing them with other firms. The young get no extra help. Cynically, policymakers are near retirement age and so are more sensitive to the older worker issue than to the younger worker one (high-status individuals are more likely to have children who made it into high-status universities and have jobs). plus there are more votes, there are more old than young and (as in the US) older invididuals are more likely to vote and (Japan-specific) to be tied to grass-roots electoral machines.
  • graphs need to be added!!

3 thoughts on “Will the baby boom retirement be a boon for the young?

  1. wilburns

    Could it be possible that the slow retirement rate of older workers could be just enough to keep up with the rate of new entrants into the workforce? Sure, the retirement rate is very slow, but so is the birthrate in Japan. I had trouble finding figures on just raw numbers of births rather than birth rates in Japan, but is it possible–considering the fertility rate in Japan is below replacement at 1.21–that fewer people will need jobs and therefore fewer jobs will need to be provided once the retirees finally DO move on?

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  2. kuveke

    So I decided to check out statistics for productivity at different ages and the results while disagreeing and generally inconclusive point to a gradual decline in productivity in older workers, however the loss of productivity was not particularly substantial in any of the studies. Next I looked at entrepreneurship thinking that young people are more entrepreneurial but again while I saw a trend of more attempts at starting new businesses in young people older entrepreneurs had more success in creating new businesses and the level of entrepreneurship was not substantially different. Older workers tend to make more minor mistakes and less serious mistakes. Young men are less productive when working with women. Older workers are more experienced so they are more realistic with what it takes to start a business. I understand why the government is trying to help the aging population by my intuition says if anything the young people would need more help since they are new to the workforce and don’t have the same experience working with the job market. Forced retirement might be a tool to increase entrepreneurship in an elderly population. Maybe that is a stretch but it would be interesting to find data showing forced retirements effect on job creation.

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  3. tommd13

    Understandably, old and young workers are not perfect substitutes. Veteran employees understand their part in the company and unlike new employees do not have to go to training wasting valuable work time. On the other hand at some point the elder employees will retire and if the average age of the workforce gets to high the company will have to bring in many more young employees to be trained. Like the prof said the higher status individuals will most likely help guide their children into prestigious jobs, but the other young workers not as fortunate will be forced to create their own paths. At this time it could prove to be a hard feat, because of government encouragement to keep elder employees on for another few years past previous retirement age. Looking at percent unemployment rate by age 15-24 is the highest with 6.9% and it gradually gets less the entire time except for the age group 55-64. As seen in the excel document from Table 17 from this website:

    http://www.stat.go.jp/english/data/roudou/154.htm

    The job market is already a competitive one and with elder employees staying in the workforce longer employers do not have to worry about training costs or errors made by new employees. It will be interesting to see the “the baby boom retirement” and the effect it has on recent graduates. Japan should be interested in their youth or they may begin to emigration in large numbers to countries seeking their degrees.

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