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

  • Alessandra Cataldi
  • Stephan Kampelmann
  • François Rycx

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.

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Article provided by Emerald Group Publishing in its journal International Journal of Manpower.

Volume (Year): 33 (2012)
Issue (Month): 3 (March)
Pages: 264-283

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Handle: RePEc:eme:ijmpps:v:33:y:2012:i:3:p:264-283
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  1. Irene Bertschek & Jenny Meyer, 2008. "Do Older Workers Lower IT-Enabled Productivity? Firm-Level Evidence from Germany," DRUID Working Papers 08-17, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
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  8. Pekka Ilmakunnas & Mika Maliranta, 2005. "Technology, Labour Characteristics and Wage-productivity Gaps," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(5), pages 623-645, October.
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  12. Ana Cardoso & Paulo Guimarães & José Varejão, 2011. "Are Older Workers Worthy of Their Pay? An Empirical Investigation of Age-Productivity and Age-Wage Nexuses," De Economist, Springer, vol. 159(2), pages 95-111, June.
  13. Torbjørn Hægeland & Tor Jakob Klette, 1997. "Do Higher Wages Reflect Higher Productivity? Education, Gender and Experience Premiums in a Matched Plant-Worker Data Set," Discussion Papers 208, Research Department of Statistics Norway.
  14. Göbel, Christian & Zwick, Thomas, 2009. "Age and productivity: evidence from linked employer employee data," ZEW Discussion Papers 09-020, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  15. Axel Börsch-Supan & Alexander Ludwig, 2010. "Old Europe Ages: Reforms and Reform Backlashes," NBER Chapters, in: Demography and the Economy, pages 169-204 National Bureau of Economic Research, Inc.
  16. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
  17. 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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