The Impact of the Aging of the Workforce on Wage Growth Over Time

Abstract

It is hypothesized that the aging of the workforce may have altered the sensitivity of wages to change in the unemployment rate. Results of an error-correction model provide support for the existence of a long-run relationship between productivity and real wages, but not between unemployment and real wages. However, a short-run relationship was detected between unemployment and wage inflation, with wages being less sensitive to unemployment for those over the age of 55, indicating that changes in the demographics associated with the aging of the labor force have dampened the magnitude of this relationship, though a significant relationship still endures.