Ageing and productivity

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Ageing and productivity

• Pekka Ilmakunnas
• Vegard Skirbekk
• Jan van Ours
• Matthias Weiss

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SET-UP

• Setting the Stage
• The Grand View
• Empirical studies
• Absenteeism
• Working capacity
• Productivity team level plant level
• Conclusions and policy implications

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• SETTING THE STAGE

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Labour force participation rates 2003
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Population Western Europe 2010-2050 (1000)
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Old age dependency ratio participation rates
50-64

• Old age dep. ratio Population 65 / 20-64
• Increase 2000-2050 moderate very large
• Participation rates 50-64 high low
• Extremes
• Scandinavian countries, Switzerland, US
• Southern Europe (including Italy)

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Participation rates 2003 males
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Older people should be forced to retire when
jobs are scarce
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Age of labour market entry and exit by birth
cohort and educational attainment Italy
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Duration of labour market attachment
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Norway 1801 and 2001, ages 41-90both genders
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Setting the Stage - conclusions

• Long term developments people grow older and
  work fewer years
• Work fewer years preferences, incentives and
  misperceptions
• Future increase labour supply of older workers
• Question Age ? Productivity?

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• THE GRAND VIEW

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Some causes of age-variation in productivity
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Components individual productivity

• Physical strength
• Experience
• Cognitive abilities
• Crystallized verbal ability age ?
• Fluid speed, memory age ?

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Importance of various abilities
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Productivity variation of the life cycle
Combining abilities
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Alternative relationships
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Changes over time

• Supply better health, better mental performance,
  longevity
• Demand physical strength less important, reduced
  working day

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The Grand View conclusions

• Abilities not constant over age and cohorts
• Various components are affect differently by
  ageing

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Measuring productivity (not easy)

• Managers ratings of employees
• Employees self-assessment
• Measure productivity directly
• Linked employer-employee datasets

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EMPIRICAL STUDIES on AGE and PRODUCTIVITY

• Extensive margin absenteeism
• Subjective measure work capacity
• Intensive margin team plant level

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Absenteeism data

• Germany Assembly plant of a German car
  manufacturer any work day 2003-2004
• Finland Quality of Working Life Survey (QWLS)
  2003

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Individual absence rates assembly line German
car manufacturer
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Age and absenteeism survey of Finnish employees
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Absenteeism - conclusions

• Age negative effect on incidence, positive
  effect on duration overall positive effect on
  absence rate
• Age diversity higher absence rates

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Working capacity self assessment

• Assuming that your top working capacity would
  score 10 points
• While your total inability to work would score 0
  points
• How many points would you give your working
  capacity at the moment?

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(No Transcript)
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Top working capacity and the effect of chronic
illness
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Working capacity - conclusions

• Age ? Working capacity ?
• Fall not dramatic, 0.3 points in 10 years
• Faster drop for jobs in which physical strength
  is required
• Technological change influence of age becomes
  smaller

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Productivity intensive margin

• Individual productivity available only in special
  cases
• Plant level firm level data effects of
• Age
• Age diversity

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Age Productivity team level

• DaimlerChrysler 2003-2004
• Productivity quality 1/errors
• Decreases with age
• Increases with job tenure
• More age diverse teams make more mistakes

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Age Productivity plant level

• Finnish Linked Employer-Employee Data (FLEED)
  1990-2002
• Industrial plants total factor productivity
• No effect of age diversity

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Relationship changes over time
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Accounting for plant cohort and tenure effects
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Conclusions

• Age-productivity relationship complex and
  multidimensional
• Relationship changes over time (across cohorts)
  and is affected by other factors
• Absenteeism ?
• Work capacity ?
• Productivity ?
• Age diversity?

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Policy implications

• Retirement plans
• Anticipating early retirement reduces investments
  in human capital actuarial neutral pension
  schemes
• Wage policies
• Reduce seniority as a basis for wages
• Human resource management
• More easy to try to prevent dismissals of older
  workers than it is to encourage hiring of older
  workers
• Employment Protection Legislation
• Experience rating of dismissal costs

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Negative effects of age on productivity should
not be underestimated
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Should not be exaggerated either