Forecasting the Wages of Young Men

The Effects of Cohort Size

by Hong W. Tan, Michael P. Ward


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In this study, the authors develop forecasts of the civilian wage structure over the next two decades for a variety of different scenarios. They focus on how the wage structure will change as the demographic trend reverses itself, i.e., as the smaller post-baby-boom birth cohorts enter the labor market in the 1980s and 1990s. Section II of the report describes the survey data used to create a working file for the analysis. Based on this file, the authors paint a broad overview of how cohort size and relative wages have changed over the 1967-1980 period. Section III discusses the wage model used and highlights the main empirical results. The assumptions and approach used to forecast wages are detailed in Sec. IV. Section V extends the wage model to investigate two alternative explanations for the observed decline in youth wages. The last section concludes with a summary of the main findings and their implications for military compensation policy.

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