Are Older Workers Less Productive? A Case Study of Aged Care Workers in Australia

Employers are reluctant to employ older workers. Is this because they are less productive than equivalent younger workers? This paper uses data from a 2007 census of residential aged care homes in Australia to examine the productivity differentials of workers at different ages. We estimate production functions that take into account the age profile of the workforce in each aged care residential facility. We find that for the facilities having high care residents only, the productivity of nurses, whose work is more demanding of specialist knowledge, keeps increasing with age while the rate of increase declines after age 50. In contrast, the productivity of carers, whose work is more demanding of physical capacity, is highest in middle age. The facilities with low care residents only provide a much lower level of services because their residents are less frail and more independent. In this case, none of the coefficients regarding the impacts of age on productivity is statistically significant – suggesting that older workers are good substitutes for younger ones.