We argue that rising supply of experience not only reduces experienced workers’ relative wages but also their relative labor market participation. From a theoretical model we derive predictions which we quasi-experimentally investigate, using variation across U.S. local labor markets (LLMs) over the last decades and instrumenting experience supply by the LLMs’ age structures a decade earlier. We find that aging substantially reduces experienced workers’ relative wages and 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.
|Series||GSBE Research Memoranda|
- j11 - Demographic Trends, Macroeconomic Effects, and Forecasts
- j21 - Labor Force and Employment, Size, and Structure
- j31 - "Wage Level and Structure; Wage Differentials"
- demographic change
- employment of experienced workers
- return to experience