Keeping Workers Happy – and Working

Much economic research stresses the role of pensions and Social Security in inducing retirement-altering the labor supply of older workers. Yet there are also demand-side effects that make firms unwilling to allow most workers to ease out.
A recent paper by David Blau and Tetyana Shvydko demonstrates this very neatly. At firms with large shares of young women (which Blau and Shvydko hypothesize are also firms with flexible work policies), older workers are less likely to leave for full retirement. The chance for a flexible work schedule alters older workers’ behavior,?driving them to stay in the workforce for longer. Given the long-term problems of Social Security and other pension schemes, this research shows there are alternatives to fiddling with pension programs and Social Security benefits that could go some way toward getting older people to stay at work. People may argue that this is bad in a recession; but eventually we will have skill shortages, and keeping older people at work is a good way to minimize them.