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Wage and (Un-)Employment Effects of an Ageing Workforce

  • Jochen Michaelis

    ()

    (University of Kassel)

  • Martin Debus

    (University of Kassel)

In almost all Western economies the median age of the workforce is increasing due to demographic factors. Given the empirical fact that workers of different ages are not perfect substitutes in production, this paper explores how change in the age pattern affects wages and (un)employment. We develop a general equilibrium model where wages for young and old workers are set by monopoly unions at the firm-level. Contrary to the common wisdom on this topic, we show that an increase in the relative number of older workers for a given labor force size has no effect on young and old unemployment. If, however, unions attach a higher weight to the wishes of the old, the unemployment rate of the old (young) will increase (decrease). In this case we observe a redistribution of wage income from the young to the old.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/21-2009_michaelis.pdf
File Function: First version, 2009
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Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 200921.

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Length: 29 pages
Date of creation: 2009
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:200921
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Phone: 06421/28-1722
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Web page: http://www.uni-marburg.de/fb02/
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  1. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, March.
  2. Andrea Ichino & Guido Schwerdt & Rudolf Winter-Ebmer & Andrea Ichino, 2013. "Too Old to Work, Too Young to Retire?," Economics working papers 2013-13, Department of Economics, Johannes Kepler University Linz, Austria.
  3. Jochen Michaelis & Michael Pflüger, 2000. "The impact of tax reforms on unemployment in a SMOPEC," Journal of Economics, Springer, vol. 72(2), pages 175-201, June.
  4. David G. Blanchflower, 2007. "International Patterns of Union Membership," British Journal of Industrial Relations, London School of Economics, vol. 45(1), pages 1-28, 03.
  5. Patrick Aubert & Eve Caroli & Muriel Roger, 2006. "New technologies, organisation and age: firm-level evidence," Economic Journal, Royal Economic Society, vol. 116(509), pages F73-F93, 02.
  6. Vegard Skirbekk, 2004. "Age and Individual Productivity: A Literature Survey," Vienna Yearbook of Population Research, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna, vol. 2(1), pages 133-154.
  7. Pissarides, C., 1988. "Unemployment Consequences Of An Aging Population: An Application Of Insider-Outsider Theory," Papers 327, London School of Economics - Centre for Labour Economics.
  8. Layard, Richard & Nickell, Stephen, 1990. "Is Unemployment Lower if Unions Bargain over Employment?," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 773-87, August.
  9. Zimmermann, Klaus F, 1991. "Ageing and the Labor Market: Age Structure, Cohort Size and Unemployment," Journal of Population Economics, Springer, vol. 4(3), pages 177-200, August.
  10. Axel Börsch-Supan, 2003. "Labor Market Effects of Population Aging," LABOUR, CEIS, vol. 17(SpecialIs), pages 5-44, 08.
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