Are There Jobs for Everyone ? An Analysis of the Relationship between the Employment of Older and Younger Persons in Indonesia

Amanina Binti Abdur Rahman

No 10972, Policy Research Working Paper Series from The World Bank

Abstract: Against the backdrop of aging, Indonesia has started to address important policy challenges, including by gradually raising the retirement age. However, the increase in the retirement age and the prospect of longer employment of older persons raises concerns about its potential impact on the employment of younger persons. This paper is the first to analyze the relationship between the employment rate of older persons and the labor market outcomes of younger persons in Indonesia. Using data from the Indonesia Labour Force Survey (Sakernas) for 2016 to 2023, the analysis explores the relationship between the labor market outcomes – that is, the employment rates, unemployment rates, hours worked, and income – of younger persons and older persons. The findings show that overall, an increase in the employment rate of older persons is significantly associated with an increase in the employment rate of youth and prime-aged persons. The positive relationship is robust and is found across most of the specifications tested, that is, across genders, education levels, sectors, and within the formal sector. Encouragingly, there is no evidence of a significant negative relationship between the employment of older persons and younger persons. When there is a significant negative relationship between the employment of older persons and other employment outcomes of younger persons, the magnitude is small. These findings support the notion that raising the retirement age can address some of the challenges faced by an aging society. Finally, lifelong learning, upskilling, and reskilling are important to facilitate longer working lives by ensuring that older workers remain employable in a changing economy.

Date: 2024-11-12
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