The Effect of Local Labor Demand Conditions on the Labor Supply Outcomes of Older Americans

Abstract

A vast literature in labor economics has studied the relationship between local labor demand shifts and the outcomes of the working age population. This literature has ignored the impacts that these shocks have on older individuals, though there are reasons to believe that the effects are not uniform by age. Using data from the Census and the Health and Retirement Study, the authors measure the effects of local labor demand conditions on a host of outcomes for older individuals including employment, retirement, Social Security claiming, wages, and job characteristics. They find that local labor demand conditions do affect the labor and retirement behavior of the older segment of the population, including Social Security claiming decisions. They also find evidence that older individuals are especially responsive to local labor demand shifts in the service industry, which they show has observably different job characteristics that may be especially attractive to older workers. Similarly, they find evidence that labor demand shocks not only increase the wages of older workers but also make the jobs more attractive on non-pecuniary dimensions.