Seniority wages and the role of firms in retirement

Abstract

In general, retirement is seen as a pure labor supply phenomenon, but firms can have strong incentives to send expensive older workers into retirement. Based on the seniority wage model developed by Lazear (1979), we discuss steep seniority wage profiles as incentives for firms to dismiss older workers before retirement. Conditional on individual retirement incentives, e.g., social security wealth or health status, the steepness of the wage profile will have different incentives for workers as compared to firms when it comes to the retirement date. Using an instrumental variable approach to account for selection of workers in our firms and for reverse causality, we find that firms with higher labor costs for older workers are associated with lower job exit age.

Retirement and healthcare utilization

“…Special severance payments (i.e., "golden handshakes") paid to the workers if they leave the job early are associated with tax advantages for the employer and employee alike. Frimmel et al (2015) show that steeper seniority wage profiles in firms lead to significantly earlier job market exit.…”

Innovative examples of age management approaches (Infographic)

“…For instance, the strict eligibility criteria and clear targeting of the Austria "Come Back" hiring subsidy (2/3 of wages) targets unemployed men aged 50 and over and unemployed women aged 45 and over. Evaluations confirm that this measure had the best effects for those from older age categories (45-54), in terms of funding period, unemployment time and income (European Union, 2014 [24]). Nevertheless, it is likely to be even more cost effective if measures are in place to prevent older workers from becoming long-term unemployed after job loss (OECD, 2018 [25]).…”

“…Share of young people (aged[15][16][17][18][19][20][21][22][23][24] who are not in employment or in education and training (NEET) Note: Data for 2014 refer to 2010 for China and for 2017 to 2015 for Brazil. Source: OECD Transition from school to work dataset, http://stats.oecd.org//Index.aspx?QueryId=92102 and national labour force surveys for Argentina, India, Indonesia and Saudi Arabia and census data for China.…”

The Intergenerational Causal Effect of Tax Evasion: Evidence from the Commuter Tax Allowance in Austria

“…Indeed, using the entire population of father-child pairs and assigning those with more than 60km an extra indicator for their distance-to-bracket provides very comparable results (see Section 11 for details).17 However, wages in Austria increase with age and experience substantially. see alsoFrimmel et al (2015).…”