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Do earnings really decline for older workers?

Author

Listed:
  • Kadija Charni
  • Stephen Bazen

Abstract

Purpose - Cross-section data suggest that the relationship between age and hourly earnings is an inverted U shape. Evidence from panel data does not necessarily confirm this finding suggesting that older workers may not experience a reduction in earnings at the end of their working life. The paper aims to discuss this issue. Design/methodology/approach - In this paper the authors use panel data on males for Great Britain in order to examine why the two types of data provide conflicting conclusions. Concentrating on the over 50s, several hypotheses are examined: overlapping cohorts, job tenure, job-changing, labour supply behaviour, and selectivity bias. Findings - Cohort and individual fixed effects partly explain the divergent conclusions. However, for fully, year-on-year employed individuals, there is no evidence of earnings decline at the end of working life. The authors find no role for selectivity due to retirement, although shorter working hours or partial retirement along with job-changing late in life does provide an explanation for why hourly earnings decline for certain older workers. Originality/value - The authors find no evidence that the process of ageing itself leads to lower earnings as suggested by the cross-section profile.

Suggested Citation

  • Kadija Charni & Stephen Bazen, 2017. "Do earnings really decline for older workers?," International Journal of Manpower, Emerald Group Publishing Limited, vol. 38(1), pages 4-24, April.
    • Handle: RePEc:eme:ijmpps:ijm-02-2016-0043
    DOI: 10.1108/IJM-02-2016-0043
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    Citations

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    Cited by:

    1. Sarah Le Duigou, 2020. "Endogenous Unemployment Benefits in an Equilibrium Job Search Model over the Life-Cycle," Post-Print hal-03884234, HAL.
    2. Kadija Charni, 2016. "Is it Better to Work When We Are Older? An Empirical Comparison Between France and Great Britain," AMSE Working Papers 1640, Aix-Marseille School of Economics, France.
    3. Majchrowska Aleksandra & Broniatowska Paulina, 2018. "The workforce’s age structure and wages—Do age and the type of occupation matter?," Lodz Economics Working Papers 8/2018, University of Lodz, Faculty of Economics and Sociology.
    4. Arthur Charpentier & Emmanuel Flachaire & Antoine Ly, 2018. "Économétrie & Machine Learning," Working Papers hal-01568851, HAL.
    5. Arthur Charpentier & Emmanuel Flachaire & Antoine Ly, 2017. "Econom\'etrie et Machine Learning," Papers 1708.06992, arXiv.org, revised Mar 2018.
    6. Axel Börsch-Supan & Irene Ferrari & Nicolas Goll & Johannes Rausch, 2023. "Retirement Decisions in Germany: Micro-Modeling," NBER Chapters, in: Social Security Programs and Retirement around the World: The Effects of Reforms on Retirement Behavior, pages 165-203, National Bureau of Economic Research, Inc.
    7. Paulina Broniatowska & Aleksandra Majchrowska & Maciej Nasiński, 2020. "Age Structure of Employment and Wages. An Analysis Across Occupational Groups," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 12(3), pages 227-250, September.

    More about this item

    Keywords

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    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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