FRANKFURT, Feb 7 (Reuters) - Euro zone labour growth is set to be dominated by immigrants, older people taking part time-work and young people entering the jobs market, a study published by the European Central Bank said on Wednesday, potential keeping a lid on wage growth.
The ECB has been using all of its policy firepower in recent years to push up inflation but wage growth has been stubbornly low as the labour market has transformed since Europe’s debt crisis and jobless data mask hidden slack.
While euro zone employment is at a record high, people over 55 have accounted for three quarters of the jobs growth with many of them doing part time or temporary work, as society ages and people remain in the labour market longer.
Workers over 60 are paid about 50 percent more than people under 30 but they also receive smaller increases, suggesting that a bigger share of older workers will naturally cap the overall increase in wages.
“Looking ahead, the older generations are likely to continue to be the main source of further employment growth for both genders,” ECB economist Katalin Bodnar said in a study, which does not necessarily represent the bank’s views.
Younger people tend to receive bigger pay increases early in their career but when they enter the labour market, they tend to lower the average wage as they start at lower levels, another factor in potentially weak wage growth going forward.
“This downward impact on wage growth is likely to persist for some time as the share of young people in employment can be expected to rise further,” the study added.
Meanwhile, employment for prime-age workers has not only peaked, it is declining as the population shrinks, the study said, noting that even the rise of prime-age women in the workforce has stopped.
Immigration both within the European Union and from outside also contributed “considerably” to employment growth and foreign workers tend to be paid less, often take temporary work and face more difficult conditions.
But immigration may also have a positive impact by freeing locals to take higher paying jobs.
“Empirical studies in both Europe and the United States have mostly shown that immigrants bring complementary skills, ideas and connections, and fill important niches in both fast-growing and declining sectors of the economy,” the ECB study said.
“The complementarity of immigrants may also help nationals to increase their labour market participation, hours worked or their skill level,” it added. (Reporting by Balazs Koranyi; Editing by Alison Williams)