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Read @Neil_Irwin on my new research suggesting aging of the workforce can explain a significant part of the productivity slowdown nytimes.com/2019/03/05/ups…
Here is a link to the paper. ma.moodys.com/rs/961-KCJ-308… The central finding is this: the share of workers age 65 and up has a negative relationship to the wages of *everyone else*....
... Basically we use a mincer regression with log pay as a function of share of workers in various age buckets at the firm level. And importantly we are doing this with ADP matched employer employee payroll data....
... This lets us do lots of robustness tests. Like focusing on big nationwide firms and using firm fixed effects, using pay levels and pay growth, and looking at the flows of older workers in and out of firms. The results are robust across all these models...
... whats more, we replicate the results in ACS data so you can see it yourselves, and we also replicate it using state-industry panel models and actual BEA productivity data. So in my humble opinion, the relationship is robust and likely causal. So why is this happening?
We have gone farther in establishing cause than mechanism, but we do find supportive evidence that it is related to technology blocking. Specifically, the effects are strongest in places with higher educated workforces. This is also not that surprising. In fact its rational...
Firms and employees pay a cost to train to use new technologies, management approaches, etc. Whoever pays these costs, they are recouped by higher pay over the remaining career. But if someone is near retiring, there's little time to recoup it. So the investment isn't made.
Thus whoever is blocking and paying the costs, there is reason why firms with older workers get stuck in their old way of doing things. Anyway, much more work to be done on the why. But I think we have made a case that this issue deserves much more focus than its getting...
The study that supports this most strongly is Maestas, Mullin, Powell, so our research is not alone but there is very little out there rand.org/pubs/working_p…
What I'd love to see is @johnvanreenen and others follow up in this work to see how an aging workforce affects firm management practices.
