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Are older workers overpaid? A literature review

  • Paul Hek

    ()

  • Daniel Vuuren

    ()

It is widely believed that wage and productivity profiles of individual workers do not coincide at all ages. We give an overview of the theories which provide a rationale for this, and discuss the empirical literature. Human capital theories typically imply that wages rise with tenure, so that job reallocation at old age would imply a wage cut. Incentive theories typically imply that wages exceed productivity at the end of a worker's career. Bargaining power of unions may also lead to 'overpayment' of older workers. Some general conclusions regarding the wages of older workers are formulated on the basis of the authors' reading of the empirical literature.

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File URL: http://hdl.handle.net/10.1007/s10797-011-9162-3
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Article provided by Springer & International Institute of Public Finance in its journal International Tax and Public Finance.

Volume (Year): 18 (2011)
Issue (Month): 4 (August)
Pages: 436-460

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Handle: RePEc:kap:itaxpf:v:18:y:2011:i:4:p:436-460
DOI: 10.1007/s10797-011-9162-3
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