Revisiting wage, earnings, and hours profiles

Abstract

We document empirical life cycle profiles of wages, earnings, and hours of work for pay from the Panel Study of Income Dynamics, following the same workers for up to four decades. For six of the eight cohorts we analyze the wage profile does not decline with age (not before 65, at least), while the earnings profile always does. The discrepancy is explained by a sharp drop in the hours of work for pay profile beginning shortly after age 50, when many workers start a smooth transition into retirement by working progressively fewer hours. This pattern is not an artifact of staggered abrupt retirement, and is robust to attrition and selection-correction (i.e., taking into account that the composition of our sample, for a given cohort, changes over time). We explore the nontrivial restrictions on dynamic models of the aggregate economy that this evidence suggests, and we provide numerical profiles that can be readily used in quantitative macroeconomic analysis.

Grandchildren and their grandparents' labor supply

“…Furthermore, we can use our estimates to perform a back-of-the-envelope calculation of the role of grandparenting in contributing to the large reductions in senior workers' labor supply along the intensive margin we have documented in Rupert and Zanella (2012). In that paper we show that in the PSID working women reduce labor supply by about 400 hours between the age of 50 and 64.…”

How does grandparent childcare affect labor supply?

“…This, in turn implies a non-negligible role of grandparents' childcare in accounting for the reduction in labor supply towards the end of the working life of women, and shows that working women reduce labor supply by about 400 hours between the age of 50 and 64 [12]. Taking this into consideration with the causal effect of becoming a grandmother on female labor supply, which was referred to earlier [1], this suggests that grandparentprovided childcare may account for one-third of the reduction in labor supply late in the working life of women in the US.…”

“…Previous work of the author contains a larger number of background references for the material presented here, and has been used intensively in all major parts of this article [1], [3], [12].…”

Macroeconomic Implications of Modeling the Internal Revenue Code in a Heterogeneous-Agent Framework

“…To calibrate the age-varying component of labor productivity, we adopt the smoothed numerical wage proles estimated in Rupert and Zanella (2015) for all individuals, normalizing the mean to unity. For the age-invariant component of labor productivity, we set The BEA does not report distributional characteristics of NIPA wage income.…”