Technological Change and the Labor Market Situation of Older Workers

Abstract

Research on labor markets has shown that much about age patterns of earnings can be understood in terms of the accumulation of job skills over a lifetime, particularly through investments in schooling and on-the-job training (Backer, 1975; Mincer, 1970, 1974). In this framework, individuals enhance their productivity and earnings before and during their work careers by accumulating job skills through investments in schooling and on-the-job training. Jobs are seen as offering two types of payoffs that are relevant for future earnings—an earnings component and a training component. The training component, which provides no immediate financial reward but increases a worker’s future productivity and earnings capacity, can be a significant part of the worker’s total compensation package. For example, Lazear (1976) estimated that training constituted about one-third of the total compensation package for young men.