Hostname: page-component-586b7cd67f-rcrh6 Total loading time: 0 Render date: 2024-11-25T07:11:35.407Z Has data issue: false hasContentIssue false
  • English
  • Français

Fertility, immigration, and lifetime wages under imperfect labor substitution

Published online by Cambridge University Press:  26 November 2020

Ross Guest  and
Nick Parr
Ross Guest*
Affiliation:
Griffith University, Griffith Business School, Nathan, Queensland, Australia
Nick Parr
Affiliation:
Faculty of Business and Economics, Macquarie University, Sydney, Australia
*
*Corresponding author. E-mail: [email protected]
Get access

Abstract

This paper provides new insights into the effect of birth cohort size on cohort lifetime wages and its sensitivity to the future trajectories of immigration and fertility. The main innovation is to relax the typical assumption of perfect substitution of labor by age. The effect of imperfect substitution of labor by age is to qualify the standard result that smaller birth cohorts are likely to enjoy relatively high wages since that result depends on the size of co-worker cohorts. The positive small cohort effect on lifetime wages therefore depends on demographic patterns, which are simulated here through low and high fertility and immigration projections. The analysis applies to actual and projected cohorts for Australia and tests the sensitivity to alternative demographic parameters, and the substitution and discount parameters. The effects of imperfect substitution can amount several percentage points of lifetime wages.

Keywords

Fertilityimmigrationimperfect substitutionintergenerational equitywagesJ21J30D00
Type
Research Papers
Information
Journal of Demographic Economics , Volume 86 , Issue 4 , December 2020 , pp. 503 - 532
Copyright
Copyright © Université catholique de Louvain 2020

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abeysinghe, T. and Gu, J. (2011) Lifetime income and housing affordability in Singapore. Urban Studies 48(9), 1875–1891.CrossRefGoogle Scholar
Attanasio, O. P. and Pistaferri, L. (2016) Consumption inequality. Journal of Economic Perspectives 30(2), 3–28.CrossRefGoogle Scholar
Australian Bureau of Statistics (2012) Employee Earnings, Benefits and Trades Union Membership. Catalogue Number 6310.0. Canberra: Australian Government.Google Scholar
Australian Bureau of Statistics (2014) Births, Australia 2013. Catalogue Number 3301.0. Canberra: Australian Government.Google Scholar
Australian Bureau of Statistics (2015a) Australian Demographic Statistics. Catalogue Number 3101.0. Canberra: Australian Government.Google Scholar
Australian Bureau of Statistics (2015b) Life Tables States, Territories and Australia 2012–14. Catalogue Number 3302.0.55.001. Canberra: Australian Government.Google Scholar
Australian Bureau of Statistics (2015c) Labour Force, Australia, Detailed. Catalogue Number 6291.0.55.0010. Canberra: Australian Government.Google Scholar
Australian Bureau of Statistics (2016) Migration Australia 2014–15. Catalogue Number 3412.0. Canberra: Australian Government.Google Scholar
Australian Bureau of Statistics (2019a) Employee Earnings and Hours. Catalogue Number 6306.0. Canberra: Australian Government.Google Scholar
Australian Bureau of Statistics (2019b) Australian Demographic Statistics, Catalogue Number 3101.0. Canberra: Australian Government.Google Scholar
Bijak, J., Kupiszewska, D., Kupiszewski, M., Saczuk, K. and Kicinger, A. (2007) Population and labour force projections for 27 European countries, 2002–052: impact of international migration on population ageing. European Journal of Population 23(1), 1–31.CrossRefGoogle ScholarPubMed
Blanchet, D. (2002) Le vieillissement de la population active: ampleur et incidence. Economie et Statistique 355(1), 123–138.CrossRefGoogle Scholar
Borjas, G. J. (2014) Immigration Economics. Cambridge, MA: Harvard University Press.CrossRefGoogle Scholar
Card, D. and Lemieux, T. (2001) Can falling supply explain the rising return to college for younger men? A cohort-based analysis. The Quarterly Journal of Economics 116(2), 705–746.CrossRefGoogle Scholar
Card, D. and Peri, G. (2016) Immigration economics by George J. Borjas: a review essay. Journal of Economic Literature 54(4), 1333–1349.CrossRefGoogle Scholar
Central Statistics Office (CSO) (Ireland) (2018) Number of Births, Deaths and Marriages. Online at: http://www.cso.ie (Accessed 25 May 2018).Google Scholar
Chiswick, B. R. and Miller, P. W. (2010) The effects of educational-occupational mismatch on immigrant earnings in Australia, with international comparisons. International Migration Review 44(4), 869–898.CrossRefGoogle Scholar
De Alwis, S. and Parr, N. (2018) Differences in occupation of ancestry subgroups of Asian birthplace groups in Australia. Australian Journal of Social Issues 53(2), 173–202.CrossRefGoogle Scholar
De Alwis, S., Parr, N. and Guo, F. (2019) Population Research and Policy Review. https://doi.org/10.1007/s11113-019-09548-9.CrossRefGoogle Scholar
Easterlin, R. (1978) What will 1984 be like? Socioeconomic implications of recent twists in age structure. Demography 15(4), 397–432.CrossRefGoogle ScholarPubMed
Eurostat (2019) Population Database. Online at: ec.europa.eu/eurostat/web/population-demography-migration-projections/data/database (Accessed 16 July 2019).Google Scholar
Fertig, M. and Schmidt, C. M. (2003) Gerontocracy in Motion? European Cross-Country Evidence on the Labor Market Consequences of Population Ageing, Vol. 956. IZA Institute of Labor Economics Discussion Paper No. 956.Google Scholar
Fox, J., Klusener, S. and Myrskyla, M. (2019) Is a positive relationship between fertility and economic development emerging at the sub-national regional level? Theoretical considerations and evidence from Europe. European Journal of Population 35(3), 487–518.CrossRefGoogle ScholarPubMed
Garnaut, R. (2008) The Garnaut Climate Change Review. Cambridge: Cambridge University Press.Google Scholar
Gauthier, A. H. (2007) The impact of family policies on fertility in industrialized countries: a review of the literature. Population Research and Policy Review 26(3), 323–346.CrossRefGoogle Scholar
Guest, R. (2007) Can OECD countries afford demographic change? Australian Economic Review 40(2), 1–16.CrossRefGoogle Scholar
Guest, R. and Jensen, B. (2016) Applying a CRESH aggregate labour index to generate age-wage profiles. Applied Economics Letters 23(1), 27–33.CrossRefGoogle Scholar
Guest, R. and Shacklock, K. (2005) The impending shift to an older mix of workers: perspectives from the management and economics literatures. International Journal of Organisational Behaviour 10(3), 713–728.Google Scholar
Haan, P., Kemptner, D. and Luthen, H. (2019) The rising longevity gap by lifetime earnings—distributional implications for the pension system. The Journal of the Economics of Ageing. https://doi.org/10.1016/j.jeoa.2019.100 199.Google Scholar
Hamermesh, D. S. (1993) Labor Demand. Princeton: Princeton University Press.Google Scholar
Heard, G. (2006) Pronatalism under Howard. People and Place 14(3), 12–25.Google Scholar
Kendig, H., Hussain, R., O'Loughlin, K. and Cannon, L. (2019) Australian attitudes to intergenerational equity: impacts of social and policy change. Ageing and Society 39, 1–28..CrossRefGoogle Scholar
Kremer, M. and Thomson, J. (1998) Why isn't convergence instantaneous? Young workers, old workers, and gradual adjustment. Journal of Economic Growth 3(1), 5–28.CrossRefGoogle Scholar
Lam, D. (1989) Population growth, age structure, and age-specific productivity. Journal of Population Economics 2(3), 189–210.CrossRefGoogle Scholar
Levine, P. B. and Mitchell, O. S. (1988) The baby boom's legacy: relative wages in the twenty-first century. American Economic Review 78(2), 66–69.Google Scholar
Lopoo, L. M. and Raissian, K. M. (2018) Fertility policy in developed countries. In Averett, S. L., Argys, L. M. and Hoffman, S. D. (eds.), The Oxford Handbook of Women and the Economy. Oxford: OUP, pp. 173–193.Google Scholar
McDonald, P. (2000) Gender equity, social institutions and the future of fertility. Journal of Population Research 17(1), 1–16.CrossRefGoogle Scholar
McDonald, P. and Kippen, R. (2001) Labour supply prospects in 16 developed countries 2000–2050. Population and Development Review 27(1), 1–32.CrossRefGoogle Scholar
McDonald, P. and Temple, J. (2010) Immigration, Labour Supply and Per Capita Gross Domestic Product: Australia 2010‒2050. Canberra: Australian Government Department of Immigration and Citizenship.Google Scholar
Moffat, J. and Roth, D. (2013) The Cohort Size Wage Relationship in Europe. Joint Discussion Paper Series in Economics No. 46-2013, Philipps-University, Marburg.Google Scholar
OECD (2019) Employment rate by age group. Online at: data.oecd.org/emp/employment-rate-by-age-group.htm#indicator-chart (Accessed 17 July 2019).Google Scholar
Office of National Statistics (ONS) (UK) (2018) Statistical Bulletin: Births in England and Wales 2016. Online at: http://www.ons.gov.uk (Accessed 25 May 2018).Google Scholar
Parr, N. (2015) Who goes to university? The changing profile of our students. The Conversation 25 May 2015.Google Scholar
Parr, N. and Guest, R. (2011) The contribution of increases in family benefits to Australia's early 21st century fertility increase: an empirical analysis. Demographic Research 25, 214–244.CrossRefGoogle Scholar
Parr, N. and Guest, R. (2014) A method for socially evaluating the effects of long-run demographic paths on living standards. Demographic Research 31(11), 275–318.CrossRefGoogle Scholar
Parr, N., Li, J. and Tickle, L. (2016) A cost of living longer: projections of the effects of prospective mortality improvement on economic support ratios for fourteen more advanced economies. Population Studies 70(2), 181–200.CrossRefGoogle Scholar
Productivity Commission (2006) Economic Impacts of Migration and Population Growth. Final Report, April. Canberra; Productivity Commission.Google Scholar
Prskawetz, A., Fent, T. and Guest, R. (2008) Workforce aging and labor productivity. The role of supply and demand for labor in the G7. Population and Development Review 34(Suppl.), 298–323.Google Scholar
Roger, M. and Wasmer, M. (2009) Heterogeneity matters: labour productivity differentiated by age and skills. Working Paper No 2009-51, Paris School of Economics, Paris.Google Scholar
Rojas, J. (2005) Life-cycle earnings, cohort size effects and social security: a quantitative exploration. Journal of Public Economics 89(2–3), 465–485.CrossRefGoogle Scholar
Siegel, J. S. and Swanson, D. A. (2004) The Methods and Materials of Demography. Sydney: Elsevier.Google Scholar
Statistics New Zealand (2018) Births and Deaths. http://www.stats.govt.nz (Accessed 25 May 2018).Google Scholar
Statistics Sweden (SCB) (2018) Population and Population Changes 1749–2017. Online at: http://www.scb.se (Accessed 25 May 2018).Google Scholar
Stebbing, A. and Spies-Butcher, B. (2016) The decline of a homeowning society? Asset-based welfare, retirement and intergenerational equity in Australia. Housing Studies 31(2), 190–207.CrossRefGoogle Scholar
Stern, N. (2007) The Economics of Climate Change: The Stern Review. Cambridge: Cambridge University Press.Google ScholarPubMed
Tamborini, C. R., Kim, C. and Sakamoto, A. (2015) Education and lifetime earnings in the United States. Demography 52(4), 1383–1407.Google ScholarPubMed
Temple, J. (2012) The calibration of CES production functions. Journal of Macroeconomics 34(2), 294–303.Google Scholar
Thompson, J. (2003) Intergenerational Equity: Issues of Principle in the Allocation of Social Resources between this Generation and the Next. Department of the Parliamentary Library Research Paper No. 7 2002-03. Canberra: Commonwealth of Australia.Google Scholar
United Nations (2017) World Population Prospects the 2017 Revision. population.un.org/wpp/.Google Scholar
United Nations Population Division (UNPD) (2006) World Population Policies 2005. New York: United Nations.Google Scholar
United Nations Population Division (UNPD) (2017a) World Population Prospects: The 2017 Revision. New York: United Nations.Google Scholar
United Nations Population Division (UNPD) (2017b) International Migration Report 2017: Highlights. New York: United Nations.Google Scholar
Withers, G. (2002) Population ageing and the role of immigration. The Australian Economic Review 35(1), 104–112.CrossRefGoogle Scholar
Yi, K.-M. and Zhang, J. (2016) Real Interest Rates Over the Long Run. Federal Reserve Bank of Minneapolis, Economic Policy Paper 6-10, September.Google Scholar