Age-related productivity decrease in high-waged and low-waged employees

Liis Roosaar (School of Economics and Business Administration, University of Tartu, Tartu, Estonia)
Jaan Masso (School of Economics and Business Administration, University of Tartu, Tartu, Estonia)
Urmas Varblane (School of Economics and Business Administration, University of Tartu, Tartu, Estonia)

International Journal of Manpower

ISSN: 0143-7720

Publication date: 2 September 2019



The purpose of this paper is to clarify whether the age-productivity curve is different for low-waged and high-waged employees.


Productivity growth is decomposed at the firm level into contributions by hired, separated and staying workers. Based on a matched employer-employee database of Estonian firms from 2006 to 2014 and considering the age as well as wages of employees, a panel data model with fixed effects is constructed to show the relative productivity of each cohort of employees.


High-waged employees appeared to be relatively more productive than low-waged employees and middle-aged were more productive than young or old employees. However, the productivity difference between young and old employees was not statistically significant. The age-productivity curve of high-waged employees appeared to be flatter than that of low-waged employees. Only in knowledge intensive services were the low-waged old employees statistically significantly less productive than high-waged old employees. In the manufacturing industry, the young were more productive than in services, in knowledge intensive services the old were less productive than in traditional services.

Research limitations/implications

The productivity of employees is only analysed for cohorts of employees.

Practical implications

Employers can be encouraged to hire older employees because old employees are shown to remain at least as productive as young employees.


The decomposition of labour productivity at the firm level is further developed, as the statistical difference between the productivity of different groups of employees is analysed.



Roosaar, L., Masso, J. and Varblane, U. (2019), "Age-related productivity decrease in high-waged and low-waged employees", International Journal of Manpower, Vol. 40 No. 6, pp. 1151-1170.

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