Sorting into Jobs and Labor Supply and Demand at Older Ages

Abstract

We document considerable heterogeneity in the fraction of older workers across occupations, and show that this is related to occupational characteristics. For example, occupations that have larger fractions of older workers tend to be less physically demanding and more cognitively demanding. Average workers' characteristics such as cognition and health are strongly correlated with these occupational characteristics, although there is considerable within-occupation heterogeneity. Based on these observations, and a Bartik-type argument, we argue that an increase in the employment share of an occupation with a high fraction of older workers implies an increased demand for older workers. This leads to a prediction that the wages of workers in such occupations may have increased in order to lower retirement rates. Using difference-in-difference methods, we do find evidence for the former, but we do not see a direct relation with retirement. However, an indirect effect through wages is consistent with our results.