Demographic change and wage returns to age in Italian provinces and in labour force subgroups (2014-2020)

Demographic change is a structural trend in Western societies and raises numerous challenges, including the aging of labour supply. Recently, such trend has been accelerating in Italy, providing the motivation for the present study, which investigates how aging affects the wage return to age, or age premium. We analyse a repeated cross-sectional microdata sample covering the period 2014-2020 and compute the age premium prevailing in each Italian province and in selected subgroups of employees, classified by age (generation), gender, education level, professional position, type of contract. Considering experience, proxied by age, as a skill to be exchanged and remunerated and the age premium as its relative price, we investigate the role of demand and supply in shaping real wage determination at an aggregate level. We find a negative and robust correlation between the increase in the mean age of the employed workforce and the age premium, limited to a subset of highly populated Italian provinces, supporting the hypothesis of the prevalence of a supply effect, though combined with an urban effect. In addition, the subgroup analysis points at the emergence of three divides in the capacity of the labour market to remunerate experience that can be explained exclusively accounting for institutional factors, namely a gender divide, a careers divide and a generational divide.