Does the Welfare State Make Older Workers Unemployable?

Gilles Saint-Paul has a new working paper that looks into if the welfare state makes older workers unemployable:

One characteristic of European labor markets (as opposed to “Anglo- Saxon” ones) is that they are heavily regulated. Historically, most of these regulations arose to protect some archetypal “insider” workers, with little concern for how they would aect the market for “outsiders”. Older workers were not highly represented among the “insiders”, which means that the im- pact of regulations on their employability had little weight in the design of those regulations. Furthermore, the problem was aggravated by ill-conceived attempts to “make room” for younger workers by inducing older workers to retire earlier, which were due to collide with the increased labor participation of the latter required by the aging problem. As a result of those developments, a culture has arisen where the older workers are assumed to be unemployable. Accordingly, some specif…c provisions that made it harder to …re them have been implemented in some countries, like the French “De- lalande” contribution discussed below.

The figure below shows employment of older workers across countries. It shows a positive relationship between the age of retirement and the employment rate of old workers.

[Via http://freemarketmojo.wordpress.com]