Population Aging, Labor Demand, and the Structure of Wages
WP#2007-14
Abstract
One consequence of demographic change is substantial shifts in the age
distribution of the working age population. As the baby boom generation
ages, the usual historical pat tern of
there being a high ratio of younger workers relative to older workers
is increasingly being replaced by a pattern of there being roughly
equal percentages of workers of different ages.
One might expect that the increasing relative supply of older workers
would lower the wage premium paid for older, more experienced workers.
This paper provides strong empirical support for this hypothesis.
Econometric estimates imply that the size of one’s birth cohort affects
wages throughout one’s working life, with
members of relatively large cohorts (at all stages of their careers)
earning a significantly lower wage than members of smaller cohorts. The
cohort size effect is of approximately the
same magnitude for men and for women. Our results suggest that cohort
size effects are quantitatively important and should be incorporated
into public policy analyses.
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Margarita Sapozhnikov is a senior associate at CRA International. Robert K. Triest is a visiting scholar at the CRR and a Senior Economist and Policy Advisor at the Federal Reserve Bank of Boston. The research reported herein was supported by The Atlantic Philanthropies. The opinions and conclusions expressed are solely those of the authors and should not be construed as representing the opinions or policy of The Atlantic Philanthropies or the Center for Retirement Research at Boston College. The authors thank Jamie Lee and Brendan Mackoff for very helpful research assistance.