DP15953 Make Yourselves Scarce: The Effect of Demographic Change on the Relative Wages and Employment Rates of Experienced Workers

Author(s): Michael Boehm, Christian Siegel
Publication Date: March 2021
Keyword(s): Demographic Change, Employment of Experienced Workers, Return to Experience
JEL(s): J11, J21, J31
Programme Areas: Labour Economics, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15953

This paper studies the impact of demographic change on experienced workers' relative wages and employment rates. We investigate empirical predictions from a framework of supply and demand for experience skill, using variation across U.S. local labor markets (LLMs) over the last decades and instrumenting experience skill supply by the LLMs' age structures a decade earlier. We find that aging substantially reduces experienced workers' relative wages and full-time employment rates, and also their labor market participation rates. Our results imply that the effect of demographic change on labor markets might be more severe than previously recognized, as it reaches beyond wages.