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Demand for Older Workers: What Do Economists Think? What Are Firms Doing?


  • Steven G. Allen


The employment rate for workers 55 and over has been increasing across the world for the last decade. This creates opportunities for employers to diversify their workforce and retain valuable knowledge and skills, while at the same time posing the challenge of rising labor costs and blocked opportunities for younger workers. This study summarizes in layperson’s terms the economic tradeoffs facing organizations as they design the optimal age structure of employees, as well as surveying recent research on how older workers fit into organizations. Empirical studies show that whereas wage and benefit costs increase with age, there is no conclusive evidence that productivity increases as well. Studies using macroeconomic data find no evidence that older workers block opportunities for the young, but two recent papers using a more disaggregated approach show that firms treat older and younger workers as substitutes. A key challenge facing older workers is the decline over the last 20 years in the odds of becoming a new hire. Although the turnover rate for older workers is much lower than for other age groups, employers have concerns about accommodating their work environment and work schedule preferences. Resume studies show age discrimination also plays a factor, especially for women. The paper concludes with suggestions for future research, including interindustry and international comparisons of microeconomic data on employment by age group and studies that take a close look within organizations that have engaged in innovative activities to hire or retain more older workers.

Suggested Citation

  • Steven G. Allen, 2019. "Demand for Older Workers: What Do Economists Think? What Are Firms Doing?," NBER Working Papers 26597, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26597
    Note: AG

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    References listed on IDEAS

    1. Johnson, Richard W & Neumark, David, 1996. "Wage Declines among Older Men," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 740-748, November.
    2. Börsch-Supan, Axel & Weiss, Matthias, 2016. "Productivity and age: Evidence from work teams at the assembly line," The Journal of the Economics of Ageing, Elsevier, vol. 7(C), pages 30-42.
    3. Robert L. Clark & Steven Nyce & Beth Ritter & John B. Shoven, 2019. "Employer Concerns and Responses to an Aging Workforce," NBER Working Papers 25572, National Bureau of Economic Research, Inc.
    4. Nicole Maestas & Kathleen J. Mullen & David Powell & Till von Wachter & Jeffrey B. Wenger, 2018. "The Value of Working Conditions in the United States and Implications for the Structure of Wages," NBER Working Papers 25204, National Bureau of Economic Research, Inc.
    5. Hellerstein, Judith K & Neumark, David & Troske, Kenneth R, 1999. "Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 409-446, July.
    6. David Neumark & Ian Burn & Patrick Button, 2019. "Is It Harder for Older Workers to Find Jobs? New and Improved Evidence from a Field Experiment," Journal of Political Economy, University of Chicago Press, vol. 127(2), pages 922-970.
    7. Haltiwanger, John C. & Lane, Julia I. & Spletzer, James R., 2007. "Wages, productivity, and the dynamic interaction of businesses and workers," Labour Economics, Elsevier, vol. 14(3), pages 575-602, June.
    8. Bruce Fallick & Charles Fleischman & Jonathan Pingle, 2010. "The Effect of Population Aging on the Aggregate Labor Market," NBER Chapters, in: Labor in the New Economy, pages 377-417, National Bureau of Economic Research, Inc.
    9. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
    10. Maestas, Nicole & Mullen, Kathleen & Powell, David & Wachter, Till von & Wenger, Jeffrey, 2018. "The Value of Working Conditions in the United States and Implications for the Structure of Wages," IZA Discussion Papers 11925, Institute of Labor Economics (IZA).
    11. Maestas, Nicole & Mullen, Kathleen J. & Powell, David & von Wachter, Till & Wenger, Jeffrey B., 2018. "The Value of Working Conditions in the United States and Implications for the Structure of Wages," CEPR Discussion Papers 13284, C.E.P.R. Discussion Papers.
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    More about this item

    JEL classification:

    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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