How Is Labor Demand Responding to the Aging Labor Force?

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C. Eugene Steuerle and Damir Cosic, Urban Institute

This paper analyzes the demand for older workers, their substitutability with younger workers, and how well the demand for older workers tracks changes in the age composition of the labor force. The main data source for the analysis is the Quarterly Workforce Indicators from 2000 to 2018, which provides earnings and employment by sector and metropolitan statistical area. The analysis also uses KLEMS national data to estimate the sector-specific price and quantity of capital and the Annual Social and Economic Supplement of the Current Population Survey to estimate educational attainment and annual hours worked by age group and sector. The paper posits a translog production function using capital and three types of labor as inputs – young workers (ages 16 to 34), mature workers (ages 35 to 54), and older workers (55 and older) – to estimate partial cross-elasticities of factor demand and factor price as measures of the substitutability between labor categories.