The Wage Process of Older Workers

TitleThe Wage Process of Older Workers
Publication TypeReport
Year of Publication2010
AuthorsCasanova, M
KeywordsEmployment and Labor Force, Methodology

Because most studies of wage profiles and wage dynamics focus on individuals in their prime working years, little is known about the wage processes of workers approaching retirement. Do wages of older workers decline with age? Do older workers face more or less wage risk than their younger counterparts? This paper answers both questions using information on wages of older men and women from the Health and Retirement Study. First, we show that there is no statistical support for a decline of wages with age. The decreasing wage-age profile observed in cross-sectional data is a result of both compositional effects and negative selection. We show that there is considerable heterogeneity in the relative importance of these two motives across gender, education groups, and pension types. Second, we find that the degree of wage risk is lower for older male workers than for younger ones. For older female workers, the degree of wage risk is lower than it is for men. We do not know of any study of wage risk for younger women to compare to our results. From a methodological perspective, we show the importance of controlling for selection into retirement based on unobservable worker characteristics in order to obtain consistent estimates of wage processes of older workers.

Endnote Keywords

labor Force Participation/Methodology/Wages

Endnote ID


Citation Key5815