Productivity in an Ageing World

There is a widespread impression that older workers are less productive than their younger colleagues. If this impression were true, population ageing would have negative effects on overall productivity as the share of older workers is increasing and would thus directly reduce economic growth. A lack of economic growth would amplify the economic strains on ageing societies already exerted by increasing pension, healthcare, and long-term care expenditures. This chapter discusses many methodological challenges that have plagued the measurement of the link between age and productivity. It reviews micro- and macroeconomic studies and juxtaposes them with the literature on the relationship between population ageing and aggregate productivity. The methodologically most convincing studies on individual productivity in standard jobs find an initial increase in productivity, probably a learning effect, but then productivity remains flat until retirement. These micro-level studies measure productivity in a given technological environment and therefore ignore the contribution to productivity from improving this environment. This is where macro studies come into play, which suggest a negative influence of population ageing on total factor productivity. While the microeconomic and the macroeconomic evidence appear to contradict each other, they do not because they measure different relationships that are not linked through simple aggregation. This result has important implications for methodology and public policy.