Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/30119 
Year of Publication: 
2009
Series/Report no.: 
MAGKS Joint Discussion Paper Series in Economics No. 2009,21
Publisher: 
Philipps-University Marburg, Faculty of Business Administration and Economics, Marburg
Abstract: 
In almost all Western economies the median age of the workforce is increasing due to demographic factors. Given the empirical fact that workers of different ages are not perfect substitutes in production, this paper explores how change in the age pattern affects wages and (un)employment. We develop a general equilibrium model where wages for young and old workers are set by monopoly unions at the firm-level. Contrary to the common wisdom on this topic, we show that an increase in the relative number of older workers for a given labor force size has no effect on young and old unemployment. If, however, unions attach a higher weight to the wishes of the old, the unemployment rate of the old (young) will increase (decrease). In this case we observe a redistribution of wage income from the young to the old.
Subjects: 
workforce ageing
unemployment
wage bargaining
JEL: 
E2
J2
J5
Document Type: 
Working Paper

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