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

Author

Listed:
  • Jochen Michaelis

    (University of Kassel)

  • Martin Debus

    (University of Kassel)

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.

Suggested Citation

  • Jochen Michaelis & Martin Debus, 2009. "Wage and (Un-)Employment Effects of an Ageing Workforce," MAGKS Papers on Economics 200921, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:200921
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    File URL: https://www.uni-marburg.de/en/fb02/research-groups/economics/macroeconomics/research/magks-joint-discussion-papers-in-economics/papers/2009-papers/21-2009_michaelis.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    3. Richard Layard & Stephen Nickell, 1990. "Is Unemployment Lower if Unions Bargain over Employment?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(3), pages 773-787.
    4. Zimmermann, Klaus F, 1991. "Ageing and the Labor Market: Age Structure, Cohort Size and Unemployment," Journal of Population Economics, Springer;European Society for Population Economics, vol. 4(3), pages 177-200, August.
    5. 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.
    6. Assar Lindbeck, 1993. "Unemployment and Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121751, April.
    7. Schmidt, Christoph M, 1992. "Ageing and Unemployment," CEPR Discussion Papers 693, C.E.P.R. Discussion Papers.
    8. 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.
    9. repec:bla:labour:v:17:y:2003:i:specialissue:p:5-44 is not listed on IDEAS
    10. 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.
    11. 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.
    12. repec:dau:papers:123456789/10051 is not listed on IDEAS
    13. 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.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. 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.
    2. 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.
    3. John Moffat & Duncan Roth, 2016. "The Cohort Size-Wage Relationship in Europe," LABOUR, CEIS, vol. 30(4), pages 415-432, December.
    4. 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].
    5. Dai, Tiantian & Fan, Hua & Liu, Xiangbo & Ma, Chao, 2022. "Delayed retirement policy and unemployment rates," Journal of Macroeconomics, Elsevier, vol. 71(C).
    6. 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.
    7. 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.
    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;
    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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