Does a Uniform Age Distribution Minimize Lifetime Wages

Abstract

Motivated by empirical evidence that age structure fluctuations affect relative wages across age groups, this paper asks whether there is a steady-state age distribution that maximizes the lifetime wages of a representative worker. The paper proves the surprising result that in a pure labor economy with any constant returns technology, a uniform age distribution )zero population growth) minimizes lifetime wages. The presence of other factors complicates, but does not necessarily reverse, this result. Effects of age structure on age-specific productivity are incorporated into overlapping generations models developed to analyze the economic effects of changes in population growth rates. Analogies of the effects of age structure on life-cycle wages with intergenerational transfer effects in consumption loan models are explored.