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Do Wages Continue Increasing at Older Ages? Evidence on the Wage Cushion in the Netherlands

Author

Listed:
  • Rob Euwals

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Anja Deelen

    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

In this study, we investigate the anatomy of older workers’ wages. The central question is whether the wage cushion—i.e., the difference between actual wages and collectively agreed-upon (maximum) contractual wages—contributes to the fact that wages continue increasing at older ages. We follow the wages of individual workers in twenty-two sectors of industry in the Netherlands using administrative data for the period 2006 – 2010. In the public sector, we find no evidence of a wage cushion. Wage scale ceilings set in collective agreements are guiding for older workers’ wages, and workers earning a contractual wage equal to a wage scale ceiling are not compensated with higher additional wages. In the private sector, we do find evidence of a wage cushion. Wage scale ceilings are less restrictive and workers earning a contractual wage exceeding the highest wage scale ceiling experience higher contractual wage growth. The private sector wage cushion enhances wage differentiation and allows for wages that continue increasing at older ages.

Suggested Citation

  • Rob Euwals & Anja Deelen, 2014. "Do Wages Continue Increasing at Older Ages? Evidence on the Wage Cushion in the Netherlands," CPB Discussion Paper 282, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:282
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    References listed on IDEAS

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    Cited by:

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    3. Anja Deelen, 2019. "Flexible Wages or Flexible Workers?," CPB Discussion Paper 405, CPB Netherlands Bureau for Economic Policy Analysis.
    4. Anja Deelen, 2019. "Flexible Wages or Flexible Workers?," CPB Discussion Paper 405.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Nicole Bosch & Vincent Dekker & Kristina Strohmaier, 2020. "A data-driven procedure to determine the bunching window: an application to the Netherlands," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(4), pages 951-979, August.
    6. de Bresser, Jochem, 2021. "Evaluating the Accuracy of Counterfactuals The Role of Heterogeneous Expectations in Life Cycle Models," Discussion Paper 2021-034, Tilburg University, Center for Economic Research.
    7. de Bresser, Jochem, 2021. "Evaluating the Accuracy of Counterfactuals The Role of Heterogeneous Expectations in Life Cycle Models," Other publications TiSEM a7e2b4d8-fed0-4e86-926f-d, Tilburg University, School of Economics and Management.

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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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