# 1 Introduction

The labor force of each industrial country is being shaped by three forces: ageing, ed ~~-~~ ucation and migration. Ageing is a powerful, gradual process that evokes concern but little policy action. Immigration is blamed for the predicament of the low ~~-s~~ killed and is provoking a political backlash. Education is viewed as a panacea to which access is unequally distributed.

Yet one question has not been addressed: what are the relative and combined effects of these three forces on wages across different skill and age groups? This is an especially pertinent question as increased wage inequality across skill and age groups dominates the political and academic debate. This paper addresses the question using data for the OECD countries on the age, education and place of birth of individuals across two decades (Arslan et al., 2015). The impact on wages is derived using a simple model of the economy that allows for imperfect substitutability between the skilled and the unskilled, old and young, and natives and foreign born. The change in the age and skill structure of labor forces emerges as the dominant force influencing relative wage changes, with migration playing a smaller role in most countries.

The database helps us to measure how the education and age structure of the pop ~~-~~ ulations have changed between the years 2000 and 2010. Populations across the OECD have become older and more skilled. Figure 1 shows the changes in the shares of four groups in the native working age population: young low ~~-s~~ killed, young high ~~-s~~ killed, old low ~~-s~~ killed and old high ~~-s~~ killed. The most striking feature is the decline across all coun ~~-~~ tries in the share of the young low ~~-s~~ killed workers (blue bars). This decline is matched by the increase in the share of the skilled, both young (orange) and old (yellow), across almost all countries. Finally, in a majority of countries, there has also been an increase in the share of the old low ~~-s~~ killed (grey). There are exceptions to this pattern, notably Japan, where the share of the old low ~~-s~~ killed workers has actually declined. Migration, especially from lower to higher income countries, is another force shaping labor markets in both sending and receiving countries. The number of migrants grew from 2.9 percent of the world population in 2000 to 3.3 percent in 2010. (World Bank, 2018). Migrants now come from an increasing number of countries, but still move to fewer destinations which are predominantly hig ~~h-~~ income OECD countries (Czaika and de Haas, 2014). Figure 2 depicts changes in the shares of the four age ~~-~~ education groups among the immigrant working age population in each OECD destination country. The patterns are similar to those for natives. Shares of the young low ~~-s~~ killed immigrants are declining while shares of the high ~~-s~~ killed are increasing. There are several exceptions, notably Belgium, to these patterns.' Similar patterns are observed when we explore the changes in the age <u>~ 1We also see that some of the Eastern</u> European countries and Japan are outliers, but they have a very small number of migrants and small changes in their numbers lead to large swings in shares.

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