Revisiting wage, earnings, and hours profiles

Author-Highlights•We document life cycle profiles of wages and hours of workers followed for 45 years.•Hours decline sharply shortly after age 50, much earlier than wages.•Wages do not decline (if they decline at all) before age 65.•We illustrate variants of the benchmark life cycle model consistent with this pattern.•We provide numerical life cycle profiles that can be used in quantitative analysis.

For the youngest cohorts whose entire working life can be observed, hours start falling much earlier than wages. Wages do not fall (if they fall at all) until one׳s late 60s. The data suggest that many workers start a smooth transition into retirement by working progressively fewer hours while still facing an upward-sloping wage profile. This pattern is not an artifact of staggered abrupt retirement or selection. This evidence imposes restrictions on dynamic models of the aggregate economy, and provide updated numerical profiles that can be readily used in quantitative macroeconomic analysis to incorporate this new pattern into aggregate models.