One of our most recent questions was
from Lorenzo, based in Italy:
Does lowering the retiring age for some workers increase employment of the youth? How to balance sound public finances with a more and more old population? Especially looking at the Fornero reform in Italy of 2011, which raised the retiring age for many workers and caused wide backlash within working class groups, however was widely supported as "necessary and inevitable" from the academic community.
Giorgio Brunello, Professor at the
University of Padua, answers:
By forcing senior workers to retire later, pension reforms that rise retirement eligibility age increase senior labour supply and employment. A concern often voiced in policy circles is that higher senior employment automatically reduces the number of jobs available to the young. This view has been forcefully opposed by professional economists, who have argued that youth employment could fall or increase depending on how the total number of jobs changes.
Although there is no automatic substitution, in the case of the Fornero reform of 2011 evidence suggests that for any 1,000 senior workers locked into employment by the reform, youth (16–29) and prime-age (30–54) employment declined by 273 and 199 workers (see Bertoni and Brunello, 2021, Does a higher retirement age reduce employment? Economic Policy).
This argument applies also when the retirement age is reduced. In this case, the fallacious expectation is that such reduction automatically increases youth employment. With reference to Italy, a 2018 reform temporarily reduced the minimum retirement age below the level introduced by the Fornero reform in 2011. However, preliminary evidence (see INPS, Rapporto Annuale, 2021) does not find any effect on youth employment in 2019—youth employment certainly did not rise.
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