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Wage and (un-)employment effects of an ageing workforce

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  • Jochen Michaelis
  • Martin Debus

Abstract

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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Suggested Citation

  • Jochen Michaelis & Martin Debus, 2011. "Wage and (un-)employment effects of an ageing workforce," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(4), pages 1493-1511, October.
    • Handle: RePEc:spr:jopoec:v:24:y:2011:i:4:p:1493-1511
    DOI: 10.1007/s00148-010-0325-9
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    2. Ichino, Andrea & Schwerdt, Guido & Winter-Ebmer, Rudolf & Zweimüller, Josef, 2017. "Too old to work, too young to retire?," The Journal of the Economics of Ageing, Elsevier, vol. 9(C), pages 14-29.
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    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. Axel Börsch-Supan, 2003. "Labor Market Effects of Population Aging," LABOUR, CEIS, vol. 17(SpecialIs), pages 5-44, August.
    8. Patrick Aubert & Eve Caroli & Muriel Roger, 2006. "New technologies, organisation and age: firm-level evidence," Economic Journal, Royal Economic Society, vol. 116(509), pages 73-93, February.
    9. 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.
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    11. Pissarides, Christopher A., 1989. "Unemployment consequences of an aging population: An application of insider-outsider theory," European Economic Review, Elsevier, vol. 33(2-3), pages 355-366, March.
    12. David G. Blanchflower, 2007. "International Patterns of Union Membership," British Journal of Industrial Relations, London School of Economics, vol. 45(1), pages 1-28, March.
    13. Assar Lindbeck, 1993. "Unemployment and Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121751, December.
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    Cited by:

    1. John Moffat & Duncan Roth, 2016. "The Cohort Size-Wage Relationship in Europe," LABOUR, CEIS, vol. 30(4), pages 415-432, December.
    2. Dai, Tiantian & Fan, Hua & Liu, Xiangbo & Ma, Chao, 2022. "Delayed retirement policy and unemployment rates," Journal of Macroeconomics, Elsevier, vol. 71(C).
    3. Michaela Fuchs & Antje Weyh, 2014. "Demographic change and unemployment in East Germany: how close are the ties?," ERSA conference papers ersa14p220, European Regional Science Association.
    4. Henseke, Golo & Tivig, Thusnelda, 2013. "Alterung in Berufen: Der Beitrag ökonomischer Einflüsse," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80001, Verein für Socialpolitik / German Economic Association.
    5. Strunz, Sebastian & Schindler, Harry, 2018. "Identifying Barriers Toward a Post-growth Economy – A Political Economy View," Ecological Economics, Elsevier, vol. 153(C), pages 68-77.
    6. Michaela Fuchs, 2016. "Unemployment decline in East Germany: the role of demography," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 36(2), pages 145-168, October.
    7. Garloff, Alfred & Roth, Duncan, 2016. "Regional age structure and young workers' wages," IAB-Discussion Paper 201606, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    8. Fuchs, Michaela & Weyh, Antje, 2014. "Demography and unemployment in East Germany : how close are the ties?," IAB-Discussion Paper 201426, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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    More about this item

    Keywords

    Workforce ageing; Unemployment; Wage bargaining; E2; J2; J5;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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