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Are Older Workers Worthy of Their Pay? An Empirical Investigation of Age-Productivity and Age-Wage Nexuses

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Author Info

  • Cardoso, Ana Rute

    () (IAE Barcelona (CSIC))

  • Guimaraes, Paulo

    () (University of Porto)

  • Varejão, José

    () (University of Porto)

Abstract

Using longitudinal employer-employee data spanning over a 22-year period, we compare age-wage and age-productivity profiles and find that productivity increases until the age range of 50-54, whereas wages peak around the age 40-44. At younger ages, wages increase in line with productivity gains but as prime-age approaches, wage increases lag behind productivity gains. As a result, older workers are, in fact, worthy of their pay, in the sense that their contribution to firm-level productivity exceeds their contribution to the wage bill. On the methodological side, we note that failure to account for the endogenous nature of the regressors in the estimation of the wage and productivity equations biases the results towards a pattern consistent with underpayment followed by overpayment type of policies.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5121.

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Length: 23 pages
Date of creation: Aug 2010
Date of revision:
Publication status: published in: De Economist, 2011, 159 (2), 95-111
Handle: RePEc:iza:izadps:dp5121

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Keywords: aging; productivity; wages;

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Cited by:
  1. Mahlberg, Bernhard & Freund, Inga & Crespo Cuaresma, Jesús & Prskawetz, Alexia, 2011. "Ageing, productivity and wages in Austria," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 03/2011, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
  2. Pfeifer, Christian & Wagner, Joachim, 2012. "Age and Gender Composition of the Workforce, Productivity and Profits: Evidence from a New Type of Data for German Enterprises," IZA Discussion Papers 6381, Institute for the Study of Labor (IZA).
  3. Benoit Dostie & Pierre Thomas Léger, 2011. "Firm-Sponsored Classroom Training: Is It Worth It For Older Workers?," CIRANO Working Papers 2011s-69, CIRANO.
  4. Alessandra Cataldi & Stephan Kampelmann & François Rycx, 2011. "Does it pay to be productive ?The case of age groups," DULBEA Working Papers 11-10, ULB -- Universite Libre de Bruxelles.
  5. Mariann RIGO & Vincent VANDENBERGHE & Fabio WALTENBERG, 2012. "Ageing and Employability. Evidence from Belgian Firm-Level Data," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2012011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  6. Dostie, Benoit, 2006. "Wages, Productivity and Aging," IZA Discussion Papers 2496, Institute for the Study of Labor (IZA).
  7. Alessandra Cataldi & Stephan Kampelmann & François Rycx, 2011. "Productivity-Wage Gaps Among Age Groups: Does the ICT Environment Matter?," De Economist, Springer, vol. 159(2), pages 193-221, June.
  8. Johannes Pöschl & Neil Foster, 2013. "Productivity Effects of Knowledge Transfers through Labour Mobility," FIW Working Paper series 117, FIW.
  9. Christian Göbel & Thomas Zwick, 2012. "Age and Productivity: Sector Differences," De Economist, Springer, vol. 160(1), pages 35-57, March.
  10. Kampelmann, Stephan & Rycx, Francois, 2011. "Are Occupations Paid What They Are Worth? An Econometric Study of Occupational Wage Inequality and Productivity," IZA Discussion Papers 5951, Institute for the Study of Labor (IZA).
  11. Vincent VANDENBERGHE, 2012. "Are firms willing to employ a greying and feminizing workforce?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2012016, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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