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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

Article publication date: 25 July 2019

Abstract

Purpose

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

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Keywords

Acknowledgements

The authors gratefully acknowledge financial support from the Estonian Research Council project No. IUT20-49 “Structural Change as the Factor of Productivity Growth in the Case of Catching up Economies”. The authors are grateful to Statistics Estonia for granting access to the data used in the paper. The data sets have been processed in accordance with the confidentiality requirements of Statistics Estonia. All the errors and omissions are of the authors. The authors are also grateful to the participants of the conference “Exploring technology upgrading in emerging and transition economies: from ‘shifting wealth I’ to ‘shifting wealth II’?” in UCL London, 26–27 June 2017.

Citation

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. https://doi.org/10.1108/IJM-03-2018-0086

Publisher

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Emerald Publishing Limited

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