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Does it pay to be productive? The case of age groups

Author

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  • Alessandra Cataldi
  • Stephan Kampelmann
  • François Rycx

Abstract

Purpose - The purpose of this paper is to evaluate empirically the relationship between workforce age, wage and productivity at the firm level. Design/methodology/approach - Panel data techniques are applied to Belgian data on private sector workers and firms during 1999-2006. Findings - Results (robust to various potential econometric issues, including unobserved firm heterogeneity, endogeneity and state dependence) suggest that older workers are significantly less productive than prime age and young workers. In contrast, the productivity of middle-aged workers is not found to be significantly different compared to young workers. Findings further indicate that average hourly wages within firms increase significantly with workers’ age. Overall, this leads to the conclusion that young (older) workers appear to be “underpaid” (“overpaid”). Originality/value - These findings contribute to the growing literature on how the workforce age structure affects productivity and wages.

Suggested Citation

  • Alessandra Cataldi & Stephan Kampelmann & François Rycx, 2012. "Does it pay to be productive? The case of age groups," International Journal of Manpower, Emerald Group Publishing, vol. 33(3), pages 264-283, June.
  • Handle: RePEc:eme:ijmpps:v:33:y:2012:i:3:p:264-283
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    References listed on IDEAS

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    1. Benoit Dostie, 2011. "Wages, Productivity and Aging," De Economist, Springer, vol. 159(2), pages 139-158, June.
    2. Edward P. Lazear & Paul Oyer, 2012. "Personnel Economics," Introductory Chapters,in: Robert Gibbons & John Roberts (ed.), The Handbook of Organizational Economics Princeton University Press.
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    4. Malmberg, Bo & Lindh, Thomas & Halvarsson, Max, 2005. "Productivity consequences of workforce ageing - Stagnation or a Horndal effect?," Arbetsrapport 2005:17, Institute for Futures Studies.
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    Citations

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    Cited by:

    1. Rycx, Francois & Saks, Yves & Tojerow, Ilan, 2016. "Misalignment of Productivity and Wages across Regions? Evidence from Belgian Matched Panel Data," IZA Discussion Papers 10336, Institute for the Study of Labor (IZA).
    2. Carmen Camacho & Fabio Mariani & Luca Pensieroso, 2017. "Illegal immigration and the shadow economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(6), pages 1050-1080, December.
    3. Garnero, Andrea & Kampelmann, Stephan & Rycx, Francois, 2013. "Part-time Work, Wages and Productivity: Evidence from Belgian Matched Panel Data," IZA Discussion Papers 7789, Institute for the Study of Labor (IZA).
    4. François Rycx & Yves Saks & Ilan Tojerow, 2015. "Does Education Raise Productivity and Wages Equally? The Moderating Roles of Age, Gender and Industry," Working Paper Research 281, National Bank of Belgium.
    5. Muriel Dejemeppe & Catherine Smith & Bruno der Linden, 2015. "Did the Intergenerational Solidarity Pact increase the employment rate of older workers in Belgium? A macro-econometric evaluation," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-23, December.
    6. Andrea ALBANESE & Bart COCKX, 2015. "Permanent Wage Cost Subsidies for Older Workers. An Effective Tool for Increasing Working Time and Postponing Early Retirement?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2015006, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    7. Andrea Albanese & Bart Cockx & Yannick Thuy, 2015. "Working Time Reductions at the End of the Career. Do they prolong the Time Spent in Employment?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2015024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    8. Maciej Lis, 2017. "Productivity based selection to retirement: Evidence from EU-SILC," IBS Working Papers 02/2017, Instytut Badan Strukturalnych.
    9. Julia Lang, 2012. "The Aims of Lifelong Learning: Age-Related Effects of Training on Wages and Job Security," SOEPpapers on Multidisciplinary Panel Data Research 478, DIW Berlin, The German Socio-Economic Panel (SOEP).
    10. Lang, Julia, 2012. "The aims of lifelong learning: Age-related effects of training on wages and job security," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62073, Verein für Socialpolitik / German Economic Association.
    11. Y. Saks, 2014. "Employees: too expensive at 50? The age component in wage-setting," Economic Review, National Bank of Belgium, issue i, pages 61-74, June.

    More about this item

    Keywords

    Belgium; Private sector organizations; Pay structures; Workforce age; Productivity; Wages; Linked panel data;

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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