Population Aging, Labor Demand, and the Structure of Wages

44 Pages Posted: 21 Jun 2017

See all articles by Michael Papadopoulos

Michael Papadopoulos

New School for Social Research

Margarita Patria

Charles River Associates (CRA)

Robert K. Triest

Federal Reserve Bank of Boston - Research Department; Boston College

Date Written: 2017-05-31

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boom generation ages, the usual historical pattern of a high ratio of younger workers relative to older workers has been replaced by a pattern of roughly equal percentages of workers of different ages.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. Estimated elasticities of wages with respect to the relative size of one’s own cohort are generally between -0.05 and -0.10, and are of similar magnitude for men and for women. Our results suggest that cohort size effects are quantitatively important and should be incorporated into public policy analyses.

Keywords: labor market demographics, population aging, wage structure, social insurance

JEL Classification: J11, J21, J26

Suggested Citation

Papadopoulos, Michael and Patria, Margarita and Triest, Robert, Population Aging, Labor Demand, and the Structure of Wages (2017-05-31). FRB of Boston Working Paper No. 17-1. Available at SSRN: https://ssrn.com/abstract=2990303

Michael Papadopoulos (Contact Author)

New School for Social Research ( email )

6 East 16th Street
New York, NY 10003
United States

Margarita Patria

Charles River Associates (CRA) ( email )

1201 F. St. NW
Ste. 700
Washington, DC 20004
United States

Robert Triest

Federal Reserve Bank of Boston - Research Department ( email )

600 Atlantic Avenue
Boston, MA 02210
United States
617-973-3431 (Phone)
617-973-3957 (Fax)

Boston College ( email )

Chestnut Hill, MA 02167
United States

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