School of Economics

2019 Discussion papers

School of Economics Discussion Paper 19/02

Make Yourselves Scarce: The Effect of
Demographic Change on the Relative Wages
and Employment Rates of Experienced Workers

Michael J. Böhm, University of Bonn
Christian Siegel, University of Kent

March 2019


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 thatthe effect of demographic change on labor markets might be more severe than previously recognized, as it reaches beyond wages.

JEL Classification: J11; J21; J31

Keywords: Demographic Change; Employment of Experienced Workers; Return to Experience

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Last Updated: 03/04/2019