The Age-Wage-Productivity Puzzle: Evidence from the Careers of Top Earners

Rachel Scarfe, Carl Singleton, Adesola Sunmoni () and Paul Telemo
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Adesola Sunmoni: Department of Economics, University of Reading

No em-dp2022-07, Economics Discussion Papers from Department of Economics, University of Reading

Abstract: There is an inverted u-shaped relationship between age and wages in most labour markets and occupations, but the effects of age on productivity are often unclear. We use panel data on productivity and salaries in a market of high earners, professional footballers (soccer players) in North America, to estimate age-productivity and age-wage profiles. We find stark differences between these profiles; wages continue to increase for several years after productivity has peaked, before dropping sharply at the end of a career. This discrepancy poses the question: why are middle-aged workers seemingly overpaid relative to their contemporaneous productivity? The richness of our dataset allows us to investigate a range of possible mechanisms that could be responsible, including institutional factors, unobserved elements of productivity, and a talent discovery theory, by which teams pay younger players less because their productivity is more uncertain. We find some evidence that tentatively supports this last mechanism.

Keywords: Labour productivity; Wages; Aging; Sports Labour Markets (search for similar items in EconPapers)
JEL-codes: J23 J24 J31 J41 Z22 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2022-09-09, Revised 2023-05-30
New Economics Papers: this item is included in nep-age, nep-cul, nep-hrm, nep-lma, nep-ltv and nep-spo
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https://research.reading.ac.uk/economics/wp-conten ... 22/09/emdp202207.pdf Revised version, 2023 (application/pdf)

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Journal Article: The age‐wage‐productivity puzzle: Evidence from the careers of top earners (2024)
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