Most research on retirement asks a simple question: when do people choose to stop working, and why? In the newest episode of Talking Economics Emerging Scholars, CERGE-EI job market candidate Sona Badalyan takes a different angle. She looks at raised retirement age as something that also happens to firms and coworkers – a change that can ripple through promotions, hiring, and peer effects.
As Sona explains, delayed retirement is not only a personal decision; it can be a workplace shock. When older employees stay longer, it may reshape opportunities for others: promotions can slow, external hiring can decline, and the “next in line” may suddenly find the line moving much more slowly.
Sona’s job market paper focuses on what she calls crowded career ladders – bottlenecks that can appear when older workers remain in their positions longer after a policy change. In her research, she studies a reform that raised women’s early retirement age by at least three years, and asks: What happens inside firms when retirement is delayed?
A key explanation she highlights is slot constraints. Put simply, many organizations have a limited number of positions at each level. If fewer senior roles open up, it can become more difficult to promote others or create space for new external hires. In the data, Sona finds patterns consistent with this idea: increased retention of older workers is closely mirrored by combined declines in promotion and hiring.
One of Sona’s findings is that middle-aged workers are more crowded out than younger workers. The reason is intuitive: they are often closer substitutes for older workers and are typically the ones closest in line to advancement on the career ladders – so they are most exposed when promotions slow down.
She also finds that these “crowding out” effects show up primarily within occupations of older workers, where workers compete directly for the same roles. Across occupations, on average, the effect is insignificant – an important detail that helps narrow down what’s driving the pattern.
Delayed retirement can create bottlenecks, but Sona finds that it can also bring benefits to some coworkers. Across occupations, older workers may provide valuable, job-specific know-how that supports colleagues in other roles – suggesting complementarities across occupations, not just competition. In settings where that specialised knowledge is especially important, retaining experienced workers can help preserve human capital and support performance in other parts of the organization.
Sona also discusses her related work that zooms in on retention itself: which older workers are most likely to stay after reforms, and why. Her research points to organizational structure and turnover costs – especially in situations where firms have fewer internal substitutes in the occupations of these older workers or where it’s more difficult to hire replacements for given occupations locally. In other words, retention of older workers in response to a raised retirement age is not uniform: it is shaped by how easy (or difficult) it is to replace skills and experience.
Overall, the takeaway of these studies is that not all older workers are a burden to the firms; their retention can help the reforms to preserve the specific human capital and decrease the turnover costs, and in some cases even help coworkers across occupations.
