Discouraged Older Male Workers and the Discouraged Worker Effect

With governments worldwide attempting to increase the labour force participation of older workers in the context of ageing populations, both older workers marginally attached to the labour force (discouraged workers), and those whose labour force participation is affected by cyclical fluctuations (via the discouraged worker effect), are of particular interest to policy makers. Analysis of OECD statistics shows that discouraged older males workers, as collected and published by government statistical agencies, are both relatively low in number and also do not display any strong cyclical pattern. In contrast, results from a panel model of eleven OECD countries’ older male labour force participation rates indicate that the econometrically estimated cyclical discouraged worker effect is the dominant influence on participation in recent decades. In comparison, the estimated influence of social security pension value on participation rates is relatively small. Further modelling reveals that the discouraged worker effect is asymmetric in nature, with results showing that the influence from a cyclical downturn in decreasing older male participation rates significantly outweighs the role of economic recovery in encouraging participation. The findings have important implications for policy reforms advocated by the OECD and ILO to increase older worker labour force participation. JEL classification: J080; J180; J260