Cohort Size Effects on the Wages of Young Men in Britain, 1961‐1989
| Published date | 01 September 1993 |
| Author | Stephen Nickell |
| DOI | http://doi.org/10.1111/j.1467-8543.1993.tb00407.x |
| Date | 01 September 1993 |
Britkh
Journal
of
Industrial Relations
31:3
Sept
1993
0007-1080
Cohort Size Effects
on
the
Wages
of
Young
Men
in
Britain,
1961-1989
Stephen
Nickell
Abstract
This paper investigates the relationship between the pay
of
young men relative
to adult men and thesize
of
the youth cohort. The evidence presented indicates
that during the post-war period, relative hourly earnings and relative union
negotiated wage rates were both negatively influenced by the size
of
the youth
cohort.
This
fact indicates that the relative availability
of
young workers
influences their rates
of
pay even if these are the outcome
of
union
negotiations.
1.
Introduction
If young workers are not perfect substitutes for workers
of
other kinds, then
we might expect their relative wages to depend on the relative size
of
their
age cohort,
so
long as youth wage differentials are subject to market forces.
Any tendency for relative wage rigidity would lead to a transfer
of
the cohort
effect from wages to unemployment. The general consensus for Britain
comes down rather strongly in favour
of
a considerable degree
of
rigidity.
This
seems
to be the general conclusion drawn by Wells
(1984)
and
OECD
(1987).
Both
of
these are consistent with the view
of
Merrilees and Wilson
(1979)
and
of
Rice
(1984)
that the youth labour market in Britain has been in
more or less continuous ‘disequilibrium’ since the Second World War. Until
the early
1960s
it was in excess demand, but in subsequent years it has been
in excess supply.
The purpose
of
this paper is
to
mount a further investigation
of
the impact
of
cohort size on youth wages.
I
make no attempt to consider the
‘disequilibrium’ hypothesis but simply allow the data to speak, by analysing
a reduced-form wage equation.
I
have focused on male wages here because
for females the potential cohort effects will be moderated by fluctuations in
participation, a problem that is less severe in the male labour market. As a
Stephen Nickell
is
with
the Institute
of
Economics
and
Statistics,
Oxford.
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