Introduction

Stimulated by the work of Schultz (1961), Becker (1962, 1964) and Mincer (1958, 1962, 1970, 1974) the relation between earnings and schooling, experience, seniority and age is one of the most well researched areas in microeconomics. Complementary to the human capital approach are a number of studies which have analysed the dynamics of age-earnings profiles, i.e. how changes in the demand for and supply of labour will systematically change the location and shape of the profiles. An issue of particular interest in a society which experiences major changes in its age distribution is the (supply) effect on earnings profiles of cohort size. The mobility of earnings is another area which has also received attention in the past, but we know much less about this topic than about the properties of average earnings functions. There is thus relatively less to be said about ageing and earnings mobility.

This paper first summarizes a few important findings from the human capital literature on age-earnings profiles, which gives an interpretation of the general static pattern of wage progression as people age. The emphasis on the human capital approach does not necessarily imply that alternative interpretations of empirical findings suggested in the literature lack explanatory power, but most empirical work has been done in the human capital tradition and it is a relatively simple but yet powerful approach.

The next step is to allow age-earnings profiles to shift and change in shape as a result of general productivity increases and changes in the demand and supply of labour.