Age and Productivity – Sector Differences?

In most industrialised countries, the average age of the workforce has been growing rapidly during the recent years. If ageing workforces affect economic sectors differently, then the total impact of ageing depends on the industrial structure of an economy. It is therefore crucial to know how different sectors are affected by ageing workforces in order to assess the impact of ageing for the competitiveness of a country. This paper measures the impact of changes in the age structure of establishments on its productivity. Specifically, we estimate the productivity impact of different age groups separately for the services, manufacturing and metal manufacturing sectors. We use German representative linked employer-employee panel data, in order to control for the characteristics of the establishments as well as the characteristics of the employees. In theory, the age-productivity profiles for different sectors should differ. For example, the importance of physical strength or the possibilities to compensate deficits in skills are likely to differ between age and sectors. However, controlling for several potential sources of estimation biases, we find no significant differences in the age-productivity profiles between sectors. Differences between sectors in the application of specific human resource measures for old employees could provide a possible explanation for our findings. These specific measures could help to compensate sector specific deficits of older employees. The results of our study suggest that the expected impact of an ageing workforce on the economic performance is hardly influenced by the industrial structure of the economy.

Göbel, Christian and Thomas Zwick (2011), Age and Productivity – Sector Differences?, ZEW Discussion Paper No. 11-058, Mannheim, published in: De Economist.