THE AGE‐EARNINGS STRUCTURE IN AUSTRALIA*

Abstract

This study examines the age-earnings structure in Australia. It presents descriptive information on relative average earnings of workers in different age groups in Australia from the late 1960s onwards, and tests for the effect on the age-earnings structure of changes in labour supply and labour demand. An important rationale for analysis of the age-earnings structure is that it can provide information on supply of and demand for different skill types of labour. Although skill is a difficult concept to define and to measure, the age or years of experience and the level of educational attainment of a worker, and a worker's occupational classification, are commonly regarded as observable proxies for skill. A worker's age or years of experience is used to measure the accumulation of general human capital. Data limitations restrict a systematic analysis of the experience-earnings structure in Australia to the period between 1982 and 1990. Hence, to enable an analysis of this aspect of the earnings structure over a longer time horizon the age-earnings structure is the focus of this study. Section II presents an introduction to the data sources which are applied in the study. Section III describes the main changes in earnings differentials between workers in different age groups in Australia from 1969 to 1994. A strength of the analysis reported in this section is that several data sources are applied to measure changes in the age-earnings structure. Section IV examines the effects of changes in labour supply and labour demand on the evolution of the age-earnings structure. Concluding remarks are presented in Section V.