As a former retirement researcher, people would often ask me for advice on retirement. Usually, my advice was really simple: don’t. The Center for Retirement Research (CRR) at Boston College literally has an entire page devoted to “The Benefits of Working Longer.” Working longer has three financial benefits. First, working longer allows the delay of Social Security claiming, increasing monthly payments in the long-run. Second, working longer allows a longer period of time to save for retirement. And third, working longer reduces the length of time those savings needs to last. But, the advice to work longer comes with an important caveat. It assumes that employers actually demand older workers. Do they?
Employers’ demand for older workers is likely driven by a pretty simple calculus: are older workers as profitable as younger ones? And, a huge part of profitability is productivity — how much revenue any given worker creates. Recently, a few studies out of CRR on older workers’ productivity caught my eye. One, looked at the hard data to investigate older workers’ actual productivity. The other asked employers how they perceived older workers’ productivity. The results suggest what every older worker probably already knows — they are every bit as good as the youth.
(Older readers, if you’re loving the kind words in this post, I have a whole book you can buy, and 25 percent of my proceeds go to Big Brothers Big Sisters of Eastern MA).
Are Older Workers as Productive as Younger Ones?
The first study that caught my eye is from my former colleagues at CRR, Laura Quinby and Gal Wettstein. They asked a simple question: “Are Older Workers Good for Business?” To answer that question, they combined many, many difficult to access datasets from the IRS and the U.S. Census. It didn’t sound easy. It didn’t sound fun. But, they were able to come up with some interesting results.
The figure below summarizes one of those results. It shows how a 1 percent increase in the share of older workers (defined as those ages 55+) at a business affects revenue per worker, a measure of productivity. Positive numbers mean that adding older workers to a business in that industry is expected to add productivity. Negative numbers mean the reverse. The takeaway is that, in many industries, older workers are significantly more productive than younger ones. For example, a 1 percent increase in the share of older workers at a manufacturing firm is estimated to increase revenue per worker by $158. In a few industries — especially finance — older workers appear less productive. On net, to quote the authors: “older workers appear to be as productive as younger workers”.
Figure 1. Estimated Effect of Increasing the Share of Workers Ages 55 and Over on Productivity, by Industry
Ok, so older workers are actually pretty productive. But for employers to want to hire them, employers must also perceive this productivity. Do they?
Do Employers Perceive Older Workers Productivity?
If ever the phrase “perception is reality” carried weight, it is in labor markets. If employers perceive workers as less productive despite reality — i.e., they discriminate against certain people — then workers suffer the consequences. To see how employers feel about older workers, the CRR took a novel approach: they asked them. In a brief by my old boss Alicia Munnell and colleague Gal Wettstein, employers indicated that they view older workers as at least as productive as younger ones, if not more. Indeed, over 90 percent of employers indicated that they view older workers as “at least as” or “more productive” than younger ones.
Figure 2. Employer Evaluations of the Relative Productivity of Older Workers, 2019
So, older workers really are as good as younger ones. And, employers seem to agree. So, if you are an older worker thinking of extending your career, hopefully you don’t have any trouble finding an employer that demands your services.