The Older-Worker Productivity Drain Is (Mostly) a Myth: Study

It is a well-demonstrated fact that many employers view older workers as less desirable than their younger counterparts, as evidenced by age discrimination in hiring and concerns about older employees’ higher costs.

However, according to a new report from the Center for Retirement Research at Boston College, the actual empirical evidence on the effect of an aging workforce on business and economic performance is “decidedly mixed,” and much of the relevant research is sorely outdated. 

The utility of employing older workers therefore remains an open question, the CRR report argues, and in fact, the analysis finds strong evidence to suggest older workers are just as productive as younger workers — though they do earn higher wages.

Furthermore, the CRR report finds the relationship between the share of older workers, productivity and profitability varies substantially by industry. Such figures, the authors argue, show that older workers play a critical role in the ongoing success of many businesses — and their importance can only be expected to increase in the decades ahead.

Taken together, the findings of the new report offer important food for thought for business owners and older workers alike, suggesting it may be time to rethink the customary view of “aging workers.” 

Outdated and Contradictory Conclusions

Data from the U.S. Census Bureau shows the share of workers over 55 has doubled since 1997, according to the study’s authors, Laura Quinby, Gal Wettstein and James Giles.

“Despite this enormous change in the age structure of the workforce, the question of the impact of workforce aging on productivity and firm performance remains largely unsettled,” the report states. “Currently, most research on the productivity of older workers in the United States is both dated and contradictory.”

To demonstrate the point, the authors parse the findings of several “seminal” reports in the field.

The first study finds that having a larger share of workers over 55 at a firm indeed reduces productivity, while the second study finds (statistically insignificant) evidence that output actually increases with the share of workers over 55.

“Potentially more concerning, these estimates have not been updated [since 1997], more than two decades ago,” the CRR report notes. “Instead of outcomes measured quantitatively, by output or profit, recent evidence in the U.S. context tends to rely on qualitative assessments or imperfect proxies of productivity, such as turnover rates.”

A Better Way

As the authors explain, the major challenge in assessing the productivity and profitability of older workers is access to current data that links employees to their employers. 

For purposes of the new CRR paper, they base their regression analyses on information taken from three distinct databases that, in combination, better allow for the linking of employees to their employers. The data comes from the Census Bureau, the IRS and other sources.