Do earnings really decline for older workers?

Kadija Charni (Aix-Marseille University (AMSE), CNRS and EHESS, Marseille, France)
Stephen Bazen (Aix-Marseille University (AMSE), CNRS and EHESS, Marseille, France)

International Journal of Manpower

ISSN: 0143-7720

Publication date: 3 April 2017

Abstract

Purpose

Cross-section data suggest that the relationship between age and hourly earnings is an inverted U shape. Evidence from panel data does not necessarily confirm this finding suggesting that older workers may not experience a reduction in earnings at the end of their working life. The paper aims to discuss this issue.

Design/methodology/approach

In this paper the authors use panel data on males for Great Britain in order to examine why the two types of data provide conflicting conclusions. Concentrating on the over 50s, several hypotheses are examined: overlapping cohorts, job tenure, job-changing, labour supply behaviour, and selectivity bias.

Findings

Cohort and individual fixed effects partly explain the divergent conclusions. However, for fully, year-on-year employed individuals, there is no evidence of earnings decline at the end of working life. The authors find no role for selectivity due to retirement, although shorter working hours or partial retirement along with job-changing late in life does provide an explanation for why hourly earnings decline for certain older workers.

Originality/value

The authors find no evidence that the process of ageing itself leads to lower earnings as suggested by the cross-section profile.

Keywords

Citation

Charni, K. and Bazen, S. (2017), "Do earnings really decline for older workers?", International Journal of Manpower, Vol. 38 No. 1, pp. 4-24. https://doi.org/10.1108/IJM-02-2016-0043

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Publisher

:

Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

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