1. Ageing and productivity Pekka Ilmakunnas Vegard Skirbekk Jan van Ours Matthias Weiss

2. SET-UP Setting the Stage The Grand View Empirical studies –Absenteeism –Working capacity –Productivity: team level – plant level Conclusions and policy implications

3. SETTING THE STAGE

4. Labour force participation rates; 2003

5. Population Western Europe 2010-2050 (1000)

6. 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)

7. Participation rates 2003 – males

8. “Older people should be forced to retire when jobs are scarce”

9. Age of labour market entry and exit by birth cohort and educational attainment; Italy

10. Duration of labour market attachment

11. Norway 1801 and 2001, ages 41-90 both genders

12. 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?

13. THE GRAND VIEW

14. Some causes of age-variation in productivity Motivation, Energy Job Experience Mental Abilities, Personality Work PerformancePhysical Abilities, Health, Strength Education Age Firm Characteristics Region, Industry Type

15. Components individual productivity Physical strength Experience Cognitive abilities: –Crystallized: verbal ability; age  –Fluid: speed, memory; age 

16. Importance of various abilities

17. Productivity variation of the life cycle Combining abilities

18. Alternative relationships

19. Changes over time Supply: better health, better mental performance, longevity Demand: physical strength less important, reduced working day

20. The Grand View – conclusions Abilities not constant over age and cohorts Various components are affect differently by ageing

21. Measuring productivity (not easy) Managers’ ratings of employees Employees self-assessment Measure productivity directly Linked employer-employee datasets

22. EMPIRICAL STUDIES on AGE and PRODUCTIVITY Extensive margin: absenteeism Subjective measure: work capacity Intensive margin: team & plant level

23. Absenteeism – data Germany: Assembly plant of a German car manufacturer – any work day 2003-2004 Finland: Quality of Working Life Survey (QWLS) 2003

24. Individual absence rates assembly line German car manufacturer

25. Age and absenteeism survey of Finnish employees

26. Absenteeism - conclusions Age: negative effect on incidence, positive effect on duration; overall positive effect on absence rate Age diversity: higher absence rates

27. 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?

29. Top working capacity and the effect of chronic illness

30. 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

31. Productivity – intensive margin Individual productivity available only in special cases Plant level & firm level data effects of: –Age –Age diversity

32. 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

33. Age – Productivity – plant level Finnish Linked Employer-Employee Data (FLEED); 1990-2002 Industrial plants – total factor productivity No effect of age diversity

34. Relationship changes over time

35. Accounting for plant cohort and tenure effects

36. 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?

37. 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

38. Negative effects of age on productivity should not be underestimated

39. Should not be exaggerated either