Introduction

The substantial ageing of the European labour force will significantly alter the wage and employment structure. It will then also probably affect labour mobility, and with open borders, also induce immigration. In an equilibrium framework, labour markets tend to equalize real wages and labour productivity. If there are age-dependent productivities, there will be an adjustment of wages as soon as the age-composition of the labour force is altered. Although it has been found that the effect of age is marginal in comparison to other factors and that productivity variations within age groups are more significant than variations across age groups, there seems to be evidence that productivity increases over the work-life as, for instance, would be predicted by human capital theory. (See OECD, 1988, and the literature cited there.) However, the necessary adjustment relies on the flexibility of the labour force and may cause unemployment, at least in the short run.

It was argued that an increase in the age of the active population will reduce labour mobility and increase absenteeism and might adversely affect productivity also via the poorer health of older workers. (More detailed surveys of the arguments are given in OECD, 1988, and United Nations, 1988. See also for the effects on labour mobility Ashenfelter, 1982; Clark and Spengler, 1980.) Efficiency losses in the allocation of labour have to be expected if the aged labour force is less willing to change jobs, industries or regions.