Countries for Old Men: An Analysis of the Age Wage Gap

Abstract

In the last three decades, the wages of older workers in many high-income countries have grown at a much faster rate than the wages of younger workers. This paper uses extensive data from multiple countries to provide an analysis of this age wage gap. First, the widening of the age wage gap stems from the increasing difficulty of reaching high-paying jobs experienced by younger workers. Second, a large share of the slowdown in the careers of younger workers occurred within firms. Third, differences in the appropriation of firm rents have been more important than worker characteristics in widening the age wage gap. The last portion of the analysis shows that the effects are larger for firms with greater constraints on adding higher-ranked jobs to their organization, which highlights the role of career spillovers in widening the age wage gap.

Keywords: wage growth, age wage gap, career spillovers

JEL Classification: J31, J21, M51, J11