Are Senior Workers Overpriced? Evidence from an Age-Differentiated Payroll Tax in Norway

Steinar Holden (), Simen Markussen () and Røed, Knut ()
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Steinar Holden: Department of Economics, University of Oslo
Simen Markussen: Ragnar Frisch Centre for Economic Research
Røed, Knut: Ragnar Frisch Centre for Economic Research

No 18727, IZA Discussion Papers from IZA Network @ LISER

Abstract: Differentiation of the employer-born payroll tax may be a tool to raise employment for groups whose wage entitlements are set above market clearing levels – e.g., through collective bargaining, minimum wage legislation or implicit contracts. We provide an empirical evaluation of a reform in Norway in 2002 whereby the payroll tax for mature (62+) workers was reduced by 4 percentage points. Our findings indicate that the reform led to a 2-3% increase in total hours worked by persons aged 62-64. Approximately 25% of the tax cut was passed on to the workers in the form of higher hourly wages.

Keywords: payroll tax; tax incidence; labor demand; labor supply; difference in differences (search for similar items in EconPapers)
JEL-codes: E24 H22 J23 J26 (search for similar items in EconPapers)
Date: 2026-06
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