Gerontocracy in Motion? – European Cross-Country Evidence on the Labor Market Consequences of Population Ageing

Gerontocracy in Motion?

Figure 5

Relative Income¹ of Full-Time Working 18-21 Year Olds in Germany
1984-2001; % of income of rest of workers

work without significant frictions (see below), the relative wages of younger
cohorts will rise. Since labor income is the principal income source for most in-
dividuals and families, these altered age-earnings or age-wage profiles then
translate into a higher per-capita income in the young generation.

As an empirical point of departure, this focus on relative changes of labor sup-
ply across different age groups calls for an augmentation of standard wage re-
gressions with measures of current cohort sizes. A large body of literature ana-
lyzing the US baby boom cohorts (e.g. Connelly 1986; Freeman 1979; Welch
1979) already documents a corresponding response of wages to a relative shift
in labor supply, with larger cohorts experiencing lower wages. The empirical
evidence for European countries is rather slim, though, and no clear picture
emerges. Wright (1991) provides evidence for the case of UK that larger co-
horts have lower earnings, when they are young but that this effect does not
persist as the cohort ages. Klevmarken (1993) reports no significant cohort
size effects for Swedish data. However, Dahlberg/Nahum (2003), utilizing al-
ternative data for the case of Sweden, find significant effects of cohort sizes on
earnings. According to their results, these estimated effects vary across educa-
tion levels.

For Germany, despite the rather strong decline in birth rates in the 1970s and
the corresponding decline in relative cohort sizes of the young, no obvious ef-
fect on the relative income position of younger cohorts emerges (Figure 5).

<<   16   17   18   19   20   21   22   >>

More intriguing information