Age and Wage: Stylized Facts and Russian Evidence

The study considers the evolution of wages of Russian workers over their life cycle. There is a large stock of evidence for developed countries that wages grow over age monotonically though with diminishing rate. Wage declines, if they take place, occur late in working life and are not large in magnitude. This shape of the profile is considered a stylized fact and has got explanation in a few influential economic theories, among which the human capital theory plays a leading role. However, recent studies exploiting data from less developed countries challenge universality of the monotonically rising shape. Some empirical evidence from Russia also raise doubts that this pattern is universal for all. This study uses various data sets for 2005–2015 to explore wage growth over age in Russia. All data sources suggest that the Russian age-wage profile looks «substandard». Wage stops growing by age 40 and starts declining fast after. The paper considers age-related changes in various components of the human capital. Among them are the level of formal education, incidence and intensity of participation in post-school training programs, development of cognitive and non-cognitive skills, the utilization of acquired occupational skills in everyday work. None of these components shows a monotonic rise that could contribute to shaping the age-wage profile as more «standard». Of course, deviation of the observed shape from the expected one can be driven by cohort differences, not by age ones. Though a robust separation of age, cohort and period effects deserves a special scrutiny, the evidence presented in the paper suggests that the age effect is likely to persist.