Increasing the retirement age: How firms adjust workforce and wages

Patrick Sturm

No 113, W.E.P. - Würzburg Economic Papers from University of Würzburg, Department of Economics

Abstract: This paper studies firm adjustments in response to a working life extension of older female employees. Specifically, I exploit the German 1999 pension reform that eliminated an early retirement pathway for women, causing an increase in their early retirement age by three years for those born after January 1, 1952. Using high-quality linked employer-employee data and a difference-in-differences event study design, I show that firms that employed affected women substantially increased their number of retained female employees aged 60-62. However, this retention resulted in a significant reduction in the number of new hires and in a modest decline in the number of wage increases among incumbent employees. Further analyses suggest that the magnitude and type of firm adjustment largely depend on the firm-specific human capital required for the respective occupation.

Keywords: firm adjustments; pension reform; internal labor markets; substitution effects (search for similar items in EconPapers)
JEL-codes: D22 H55 J26 M51 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-age, nep-lma and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wuewep:333395

DOI: 10.25972/OPUS-42966

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