U.S. Real Wage Growth: Slowing Down With Age – Robert Rich, Joseph Tracy, and Ellen Fu. September 28, 2016.
“In Monday’s post, we described the estimation of real wage growth rates for different cohorts of U.S. workers. We showed that the life-cycle pattern of real wage growth is characterized by high growth early in a worker’s career, little to no growth in mid-career, and negative growth as workers near retirement. We also documented that a growing fraction of the U.S. adult population is transitioning into the flat to negative real wage growth phases of their careers. Here, we turn our attention to estimating the effect of this demographic shift on the economy-wide average real wage growth rate. Our analysis shows that this economy-wide average real wage growth rate has declined by a third since the mid-1980s.  As discussed in our recent post, real wages, holding constant any cyclical effects, show positive growth that is concentrated early in a worker’s career. By age 40, real wage growth has typically declined to around zero. The following chart, reproduced from Monday’s post, depicts this pattern for the five cohorts of white males born in the 1950s by different education levels…”