Does Delayed Retirement Crowd Out Workforce Welfare? Evidence in China

Abstract

Does delayed retirement crowd out the welfare of the workforce? To answer this question, a dynamic optimization framework is established to simulate the impact of delayed retirement on the welfare of the working population over time. Simulations are conducted based on practical and feasible parameters. Delayed retirement was found to improve the welfare of the working population rather than crowding it out. Furthermore, the results are robust against changes in parameters and modes of supporting elderly individuals. In terms of policymaking, it is suggested that such facts be shared with the public and that a delayed retirement plan be introduced as soon as possible to manage the pension and retirement wave caused by post-1960s baby boomers. However, to ensure that the delayed retirement plan does not lead to a reduction in the welfare of the working population, increases in fertility costs and the pension replacement rate should be appropriately controlled.