The Effect of Retirement Age and Employment Strategies on the Iranian Labor Market based on the General Policies of Population

The employment of different age groups is one of the main topics among the policy makers. The government has always been seeking ways in the social welfare system to provide job opportunities for the young people. One way is to change the age of retirement. The aim of this study is to investigate the effect of retirement age on employment and unemployment. The study uses the two-stage constant elasticity of substitution function and nonlinear estimation to analyze the replacement of the young labor in the Iranian labor market from 2005 to 2018 and the effect of retirement age change on the employment of different age groups. The findings indicate that the substitution rate of young labor in the Iranian labor market was 42 percent, and thus, as 100 people get retired, only 42 individuals get employed. Therefore, the policy of retirement age change was not very much influential. Also, considering the fact that the social welfare system is salary-based and its budget is based on current payment, these policies may challenge the financial sustainability of the social welfare system.