Challenges of Labor Force Participation in Aging Societies and Shifting Economies

As SIPA students collaborating with the World Bank’s Social Protection and Labour unit, the team examined whether older workers crowd out employment opportunities for younger workers, a longstanding debate in labour economics often associated with the “lump of labour” fallacy. The project found limited evidence that older worker participation directly causes youth unemployment. Instead, labor market outcomes appeared to be driven primarily by structural characteristics such as informality, labor market segmentation, skills mismatch, and limited formal-sector job creation.

The project combined cross-national analysis with in-depth case studies of Morocco and Brazil. Using data from the Organisation for Economic Co-operation and Development (OECD) and International Labour Organization (ILO), the team identified broad patterns in labor force participation across regions and age groups. The Morocco case highlighted how high informality, structural mismatch, and differences in job preferences reduce direct competition between generations, while also examining the limited effects of the 2016 civil service pension reform. The Brazil case examined the 2019 pension reform as a natural experiment and applied a difference-in-differences framework to analyze more than 5 million observations across 27 states and 52 quarters. Overall, the project challenged simplified assumptions about intergenerational job competition and provided policy insights relevant to pension reform, labor market design, and inclusive economic development.