The Impact of the Retirement Slowdown on the U.S. Youth Labor Market

Employment among older Americans has sharply risen since the mid-1990s, particularly in high-skill jobs. How has this labor-supply increase affected other participants in the labor market, and new entrants in particular? Exploiting cross-commuting zone differences in age composition among the old driven in large part by historical birth patterns, this paper explores the impact of retirement trends on youth employment outcomes between 1980 and 2017. I find that in commuting zones where fewer older workers retire due to the initial age structure, the share of younger workers in high-skill jobs declines while the share of younger workers in low-skill jobs rises. Fewer retirements also lead to a rise in the share of younger workers who have higher educational attainment than their job typically requires, declining youth wages, and lower job mobility. Together, the results suggest that the retirement slowdown has contributed to stagnant early career outcomes in recent decades, explaining 30 percent of the rise in the share of younger workers in low-skill jobs between 1980 and 2017. JEL: J11, J21, J24, J26 ∗I thank Martha Bailey, Matthias Doepke, Jon Guryan, Lee Lockwood and Matt Notowidigdo for their guidance throughout this project. For helpful comments and discussions, I thank Lori Beaman, Dan Fetter, Ben Friedrich, Sasha Indarte, Seema Jayachandran, Cynthia Kinnan, Shariq Mohammed, Mel Stephens, as well as seminar participants at the Federal Reserve Bank of Dallas, NBER Labor Studies Fall Meeting, NBER Summer Institute, Northwestern University, Stockholm University, University of Michigan, and Washington University in St. Louis. I gratefully acknowledge financial support from the Alfred P. Sloan Foundation Pre-Doctoral Fellowship on the Economics of an Aging Workforce, awarded through the NBER. †Population Studies Center, University of Michigan, 426 Thompson St, Ann Arbor, MI 48106 (email: mohnen@umich.edu).