This dissertation is comprised of three chapters analyzing how establishments react to increases in pensionable age. Chapter 1: Understanding the Impact of Postponed Retirements on the Hiring Decisions of Firms: The solvency of public pension systems in countries with pay-as-you-go pension schemes have led many of these countries to adopt changes in the age of eligibility for full-benefits. One such country is Germany who implemented a change in their pensionable age in a major reform enacted in 1992. There have been multiple studies that have looked at the effectiveness of this reform in terms of older workers delaying their retirements. However, less is known about how firms have reacted to these changes and if these changes in policy have caused firms to change their hiring behavior. Using administrative linked employer-employee data I exploit pre-policy variation in worker age distributions to serve as a source of identification for studying how employers reacted in-terms-of hiring behavior. I find that firms that had a higher share of older workers, and thus were impacted more by the change in pensionable age, decreased their hiring. For a one percentage-point increase in the share of workers who are predicted to have retired under the old pension system the share of workers that are new hires decreases by 0.324 percentage points. This is a 2.16%decrease at the mean. When smaller age bins are studied, I find that this negative impact is found for those aged under 25 and those age 25⁰́₃34. In contrast there is a positive impact on individuals age 45⁰́₃54, 55⁰́₃64, and over 65. When looking at contract types there is an over 7% decrease in the hires of trainees and an over 10% increase in the hires of workers on partial retirement contracts.Chapter 2: Effect of Postponed Retirements on Wage Growth of Younger Workers (withPeter Berg, Mary Hamman, Daniela Hochfellner, Matthew M. Piszczek and Christopher Ruhm): This paper uses linked-employer-employee data to examine the effects of postponed retirements on the wage progression of younger workers within establishments. A German pension reform is the source of identification. We find no evidence of slower wage growth. Instead we find faster wage growth, especially among workers aged 41 to 57. We cannot rule out separations as a mechanism, but patterns in estimates by age and tenure are not consistent with layoffs. Instead, we find evidence of less frequent promotions and we interpret the wage findings as consistent with compensating wage differentials for postponed promotionsChapter 3: Pension Reforms and their Implications for Establishment Downsizing (with PeterBerg, Mary Hamman, Daniela Hochfellner, Matthew M. Piszczek and Christopher Ruhm): While the empirical literature on the effects of pension reform on workers is broad, less is known about the impact on employers. Yet reforms that create incentives to postpone retirement may have extensive effects on employer labor demand and labor costs, especially in settings where there are strict legal protections against age discrimination in employment. Although public pension system reforms generally are structured to treat all workers within the same birth cohort similarly, the impact on employers may vary substantially due to differences in the age composition of their employees. Using this variation as a source of identification, we examine whether the differential impact of pension reform leads to differences in the incidence of workforce downsizing, a sign of possible financial distress. To ensure estimates are not biased due to attrition, we also model associations between the impact of pension reform and establishment closures and find no association. Results for downsizing consistently show establishments with a higher share of older workers are more likely to experience downsizing. When we segment workers within establishments by age, the absolute changes in downsizing probabilities are highest for younger workers. Preliminary results indicate works councils may increase the risk of downsizing for older workers and protect employment for young and prime workers.
Read
