Date of Award

6-2017

Document Type

Open Access

Degree Name

Bachelor of Science

Department

Economics

First Advisor

Younghwan Song

Language

English

Keywords

labor market

Abstract

This paper investigates the often repeated 'lump of labor' theory that the increasing labor force participation of older workers negatively impacts the labor market activity of younger workers. Using the panel data spanning from 1998 to 2015 from the Merged Outgoing Rotation Groups of the Current Population Survey, this paper employs time-series state-level regressions to determine the extent to which such 'crowding out' exists in the United States. Existing studies show little evidence of substitution between young and old workers. In contrast to previous studies, this paper controls for differences in individual educational levels by disaggregating the labor force sample into four educational attainment categories: less high school graduates; high school graduates; some college graduates; and college-higher graduates. This is an indicator of skills associated with workers since the more similar the groups are, with respect to skills, the greater the degree of possible substitution. The estimates show no evidence that increasing the employment of older persons reduces either the job opportunities or wage rates of younger counterparts. The patterns are consistent when including considerations of education level. The lack of the trade-off of job opportunities between younger and older workers will not only have an important policy implication, but also lead to a reexamination of the overall understanding of labor markets.

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