Do Older Workers Affect Productivity?

According to “The Impact of Population Aging and Delayed Retirement on Workforce Productivity” from the Center for Retirement Research at Boston College, the two main reasons for the increase in older workers is the size of the Baby Boom generation and labor force participation rates among those ages 60 to 74 have increased.

Gary Burtless, author of the paper, said, “There are enormous differences between the labor force participation rates of older Americans depending on their level of schooling. Research shows that people with limited education have low employment rates in old age, while those with college and advanced degrees tend to remain in the work force longer.”

If less productive workers selectively exit the work force at younger ages, he said, the average productivity of the older workers who remain may compare favorably to the average productivity of the young. A surge in the percentage of the potential work force that is old may simply increase the proportion of the workforce that consists of comparatively skilled older workers.

“If worker productivity has been harmed by the surge of older workers into the labor force, the fact is not evident in the earnings statistics for the elderly themselves,” said Burtless.

He explained that using hourly wages as a standard benchmark for measuring individual worker productivity, research showed workers between ages 60 and 74 are currently paid more than an average worker who is between 25 and 59. The hourly pay premium for older men was about 20% in 2010 and about 10% for women.

Burtless added that while other benchmarks show a somewhat less favorable picture, all show considerable improvement in the relative position of aged workers compared with the nonaged. None of the indicators of male productivity, he said, suggest older male workers are less productive than average workers who are between 25 and 59.

“The expectation that older workers will reduce average productivity may be fueled by the perception that the aged are less healthy, less educated, less up-to-date in their knowledge, and more fragile than the young,” said Burtless. While these images contain some grains of truth, he said, they do not necessarily describe the people who choose or who are permitted to remain in paid employment at older ages.

The full paper, as well as an executive summary, can be found here.