Demand for older workers: What do we know? What do we need to learn?

Abstract

The employment rate for workers 55 and over has been increasing across the world for the last two decades. This creates opportunities for employers to diversify their workforce and retain valuable knowledge and skills, while at the same time posing the challenges of rising labor costs and blocked opportunities for younger workers. This study summarizes the economic tradeoffs facing organizations as they design their optimal age structure, along with 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 younger workers, whereas recent papers using a more disaggregated approach find mixed results. 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 re-examining matched employee-employer data sets.