Sunday, February 14, 2010

Research: Productivity of Older Workers Decreases with Age, but Decline is Limited

A Dutch labor economist looking at age effects at the individual level by analyzing data on running and publishing in economic journals has concluded that the productivity of older workers indeed decreases with their age, but that the decline is limited, and found no evidence of a pay-productivity gap at higher ages. In "Will You Still Need Me: When I’m 64?" (De Economist), Jan C. Van Ours, of Triburg University, undertook the study to test the perception whether older workers without jobs have a harder time finding one because of A gap between wage and productivity--that is, older workers having a wage that is higher than their productivity.
To shed some light on the relationship between age and productivity I analyzed panel data on individuals and firms. To the extent that running performance represents physical productivity I find evidence of a productivity decline after age 40. To the extent that publishing in economics journals represents mental productivity I do not find evidence of a productivity decline, even after age 50. When measured at the firm level I find little evidence of an increasing pay-productivity gap at higher ages of the workforce.
Van Ours acknowledges that there are limitations of the empirical analysis, but nevertheless believes that while "the potential negative effects of aging on productivity should not be underestimated; they should not be exaggerated either." In particular, there "is no need to worry too much about age-related productivity declines or an age related pay-productivity gap." However, since older workers are not very likely to return to a job after becoming unemployed, he suggests that the labor market position of older workers will remain an area of policy concern.

Sources: SpringerLink Summary (January 9, 2010); "Older workers do not necessarily perform worse" (February 12, 2010)

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