Wednesday, March 22, 2006

Opinion: Age-Based Salary Questioned

Writing as the "Underground Economist" for Slate, Tim Harford, a columnist for the Financial Times, takes on the decades of economic studies that "have produced the conclusion that average wages increase with age almost until retirement, yet average productivity seems to be flat or perhaps even declining after the age of 50." While he recognizes that seniority wages are probably here to stay as long as it is hard to reward good performance instantly and accurately, he suggests that if wages could track productivity better, as they do for the self-employed, both older and younger workers could be better off:
Young workers can rightly grumble that they are paid a pittance for doing valuable work. Older workers also have good cause to worry: They are being subsidized, but subsidies are expensive, and that means they have every reason to fear the sack. Wouldn't it make more sense for young workers to be paid a bit more, old workers to be paid a bit less, nobody to feel exploited, and nobody to fear premature retirement?
Source: "Fire Grandpa! Hire Junior! - Why older workers are paid way too much, and younger workers way too little" Slate (March 18, 2006)

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