No. 1297 - Workforce aging, pension reforms, and firm outcomes

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by Francesca Carta, Francesco D'Amuri and Till von Wachter (University of California Los Angeles - UCLA)September 2020

Raising statutory retirement ages has been a popular policy to increase the labor supply of older workers and to guarantee the sustainability of the welfare system. However, its effects on outcomes for firm and the labour market have been insufficiently investigated. This paper quantifies the effects on workers and firms of the unexpected increase in the statutory retirement age introduced by the Fornero reform in 2011. The reform affected differently firms with otherwise similar characteristics.

The firms most affected by the 2011 reform increased the number of employees in all age classes, with no effect on investment and daily wages. Total labor costs and value added increased broadly in line with employment growth. These results suggest that there are complementarities between employees of different ages and that older workers are endowed with firm-specific skills that are hard to replace.

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