lives can therefore have positive impacts on the economy and is important to mitigate declines in GDP growth resulting from a fall in the working age population in aging societies.

**A major consideration when thinking about if and how to support the employment of older persons is the potential impact on the employment of younger persons.** This notion relates to what is often called the lump of labor fallacy, or the belief that there is a fixed number of jobs in an economy, which means that increasing employment opportunities for older persons would decrease employment opportunities for younger persons (Gruber, Milligan and Wise 2010). In practice, the number of jobs in an economy is not fixed, and an increase in labor demand (for older persons or otherwise) translates to an increase in aggregate demand in an economy through an increase in consumption by these workers. Subsequently, this increases the demand for labor further. In other words, a growing economy with an increasing demand for older workers will likely also experience an increase in demand for other workers, including younger workers (Apella 2024). Moreover, older and younger persons are not necessarily substitutes. They are likely to prefer different types of jobs, and have different skills. For example, jobs that are more physically demanding are less conducive for older persons (Acemoglu, Mühlbach and Scott 2022). Thus, older workers are less likely to crowd out younger workers in such jobs.

**The high degree of informality in the Indonesian economy exacerbates concerns of substitutability between older and younger persons.** Following the definition of informal employment put forward by the International Conference of Labour Statisticians in 2017 (ICLS-17), at 76.7 percent, informal employment made up more than two-thirds of total employment in Indonesia in 2023 (see Footnote 6). Since informal work is more likely to be low-skilled and require minimal formal education (discussed in Section 2), there is a possibility that older and younger workers are more substitutable in Indonesia compared to economies with low informal employment. That said, more research is needed to establish the relationship between informality and the substitutability of older and younger workers. Further, Indonesia has a large youth population and a youth unemployment rate that is more than three times higher than the national unemployment rate. This makes it especially important to ensure that the employment of older persons does not crowd out opportunities for younger persons.

**Despite these concerns, empirical analysis conducted in this paper finds evidence that an increase in the employment of older persons actually increases employment opportunities for younger persons.** This finding is robust and is found across most specifications tested, that is, across genders, education levels, and sectors. It reflects the notion that a growing economy increases employment opportunities for older and younger workers alike. Positive relationships were also found between the formal employment rates of older and younger persons. Even though these findings do not reflect a causal relationship between the employment rates of older and younger persons, the consistency of the findings across various specifications provides confidence of its reliability. Most importantly, there is no evidence of a negative relationship between the employment rates of older and younger persons. The findings in this paper are also consistent with the findings for OECD countries (Gruber et al. 2010, Munnell and Wu 2013).

**The remainder of this paper is organized as follows.** The next section provides an overview of the Indonesian labor market, with the objective of informing the findings of this paper. The third section presents a brief literature review. The fourth section presents the data and methodology used in this paper. The fifth section presents findings from the analyses conducted. The sixth section concludes.

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