Abstract: Retirement system reforms such as postponing retirement age in law
are needed in China because of its rapid population aging. The overquick aging will
result in both shortage of labor force supply and incubus of the social security system.
The Chinese government acknowledged the negative influences of population aging,
but finally decided to maintain the retirement age in law unchanged. The reason, as
claimed by the policy makers and many socio-economic scholars, is postponing
retirement age in law in China will crowd out youth employment. Unfortunately, no
empirical evidences are provided, although the claim is critical to the potential
retirement system reform. In this paper, we firstly address the validity of this claim.
Using micro data from China’s 1990 and 2000 census and the 2005 1% population
sample survey, we provide the first piece of evidence on the relationship between
elderly employment and youth employment in China. Our OLS estimation results
suggest that employment rates of younger persons are positively rather than
negatively associated with employment rate of older persons. We further tried to
identify a causal relationship by using two-way fixed effects and TSLS estimation
strategies and found results consistent with our OLS estimation. Finally, we examine
whether employment of older persons hurts the youth at the intensive margin by
estimating the impact of elderly employment on younger workers’ monthly wage and
still found a positive rather than negative effect. In short, the claim that postponing the
retirement age will hurt the youth cannot be supported by empirical evidence.
Although our empirical results are tentative, we view this paper as an important try to
provide the first piece of evidence on the potential impact of retirement reform on
youth employment and as suggesting further empirical studies on the claim that
postponing retirement age will hurt the youth