Ageing of the Workforce and Wages—Does the Type of Occupation Matter?

Abstract

We analyze the relationship between ageing of the workforce and average wages. We use data from the Structure of Earnings Survey and analyze hourly wages across nine major occupational groups in 27 EU economies in 2002–2014. We confirm a significant relationship between the share of workers aged 50 years and older and wages. In the whole sample the sign of this relationship is negative, however, it differs across occupational groups and over time. In groups with constant investment in human capital wages increase with age. In groups in which physical strength is more important, productivity and wages decrease with age.

Keywords:

• Age structure
• European Union countries
• occupational groups
• wages
• workforce ageing

JEL Classification:

• J24
• J31
• J14

Acknowledgement

The project is financed by the National Science Centre, Poland, grant No: UMO-2015/19/B/HS4/03231. The authors would like to thank Paweł Strawiński from the University of Warsaw as well as participants of the ESPAnet 2018 Conference and Economic Turmoil in Contemporary Europe III Conference for their valuable comments and suggestions.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. This paper follows the classification from the International Standard Classification of Occupations (ISCO-08), available at: http://www.ilo.org/public/english/bureau/stat/isco/.

2. According to the ISCO-08, nine major occupational groups exist, as follows: (1) Managers, (2) Professionals, (3) Technicians and associate professionals, (4) Clerical support workers, (5) Service and sales workers, (6) Skilled agricultural and fishery workers, (7) Craft and related trade workers, (8) Plant and machine operators and assemblers, and (9) Elementary occupations. The armed forces group (0) is typically treated as separate and not included in economic analyses.

3. Hourly gross earnings are defined as the gross earnings in the reference month divided by the number of hours paid during the same period. The number of hours paid includes all normal and overtime hours worked and remunerated by the employer during the reference month. Hours not worked but nevertheless paid—such as annual leave, public holidays, paid sick leave, paid vocational training, or paid special leave—are counted as “paid hours” (Source: Eurostat).

4. As our panel is wide (27 countries x 8 occupational groups) but short (only 4 observations over time), we do not control for a panel-specific autocorrelation structure as the number of estimated parameters then sharply increases.

Additional information

Funding

This work was supported by the Narodowe Centrum Nauki [2015/19/B/HS4/03231].