Quick Hit Ashlee Rezin Wednesday June 12th, 2013, 2:19pm

Aging Workforce Does Not Negatively Impact Productivity, But Does Hurt Young Workers

Contrary to popular belief, an increase in the proportion of older employees in America’s workforce has not led to a deterioration of productivity, according to a recent study from the Brookings Institution.

“A lot of people feel or suspect that aging workers are more fragile, not as up to date technologically, are slower to learn, and therefore may be less productive than younger workers,” said Gray Burtless, an economist with the Brookings Institution and author of the report. “But recent years have seen a sharp increase in an older workforce, and it has not had an adverse impact on productivity.”

America’s older workforce, ages 60 to 74, average 10 percent to 20 percent more in hourly wages than the nation's younger workforce, ages 25 to 59, according to the report, “The Impact of Populating Aging and Delayed Retirement on Workforce Productivity.”

Wages for older workers have been increasing for more than a decade, the study, which was commissioned by the U.S. Social Security Administration (SSA), indicates.

Essentially, the steady pay improvement for older employees, relative to wages for younger employees, leads the report to conclude America’s aging workforce has not negatively impacted the timely production of goods and services.

“Employers are certainly paying these workers more than they’re paying younger workers and that is an indication that they must be at least as productive, if not more productive, than younger workers,” said Burtless.

He added that older workers are more likely to have expensive health care, and because it costs employers more to provide health insurance for 60 year-old workers than 40 year-old workers, employers would see little benefit in retaining an older workforce if the employees weren’t valuable.

Contributing to older workers’ productivity is an increase in education, the study finds. Reportedly, the gap in education of older and younger workers has narrowed considerably throughout the last two decades, with older workers gaining more academic knowledge.

Women ages 62 to 74 who hold a doctoral or professional degree saw a surge of roughly 20 percent in labor participation between 1991 and 2010, the study points out. Men of that age reportedly saw an increase of nearly 10 percent during that same time.

“Older, better educated, and more experienced workers are typically more productive and earn higher hourly wages than younger, less educated, and less experienced ones,” the report reads.

According to the Bureau of Labor Statistics, labor force participation amongst Americans ages 55 to 64 increased from 59.2 percent in 2000 to 64.5 percent in 2012.

For workers aged 65 years or more, workforce involvement increased from 12.9 percent to 18.5 percent during that same time period.

“They’re contributing to the broader economy; they’re working longer; they’re producing goods and services; and they’re paying more in taxes,” said Sara Rix, senior strategic policy advisor for the AARP Public Policy Institute. “Older workers working longer are an important part of economic growth.”

Meanwhile, the nationwide unemployment rate among individuals ages 16 to 24 is 16.2 percent, staggeringly higher than the overall nationwide average of 7.6 percent in May.

The unemployment rate for Americans 55 years-old and older was 5.3 percent in May, according to the Bureau of Labor Statistics.

“Lots of gains that have been enjoyed by older workers come at the expense of younger workers in a market where there’s a real shortage of jobs,” said Burtless.

As economic insecurity increases, so does older employees’ motivation to stay in the workforce, according to Michael LeRoy, professor of employment relations at the School of Labor and Employment Relations at the University of Illinois.

“People are delaying their retirement, and they’re literally sitting on jobs that others would take, and those others are younger workers,” he said. “Most likely because there’s less to retire to.”

LeRoy said private sector employees’ savings and 401(k)-style plans were significantly reduced during the 2007 recession and, he noted, if they’ve recuperated those loses, workers will most likely continue to doubt their retirement security.

He added that the average 401(k) was reduced by more than 30 percent during the Great Recession.

“There’s more insecurity about retirement, Social Security and other post-employment benefits,” LeRoy said. “They’re crowding out opportunities for a new generation of workers because there’s not a lot of security and everyone is wondering when the next economic crisis will hit.”

For Illinois, which had an unemployment rate of 9.3 percent in April, Burtless said older workers see an advantage.

“When the overall unemployment rate is high, the thing that is really hurting jobless workers is people are not quitting their jobs,” he said. “Older workers can hang on to their jobs.”

Burtless estimated that America has 7 million to 7.5 million fewer jobs than it needs for full employment. He attributed high unemployment among young workers to a low job creation rate.

“I think that if we had a job market like we did in the late 1990s, this wouldn’t be a problem,” he said. “Employers would be creating lots of new jobs every month, every year, more than enough jobs to soak up the increase in 20 year-olds coming on to the job market.”

But regardless of job creation, he continued, America would still see an increased proportion of an older workforce.

“Workers do not favor hiring older workers. If you have a job, and you’re old, you’re probably more likely to hang on for dear life and do the best job possible,” he said.

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