It is not older workers’ falling productivity that seems to hold back the economy, but their influence on those around them
first time in history, the Earth has more people over the age of 65 than under the age of five. In another two decades the ratio will be two-to-one, according to a recent analysis by Torsten Sløk of Deutsche Bank. The trend has economists worried about everything from soaring pension costs to “secular stagnation”—the chronically weak growth that comes from having too few investment opportunities to absorb available savings. The world’s greying is inevitable.
Furthermore, if weak productivity growth was caused by older workers producing less, pay patterns should reflect that. Wages would tend to rise at the beginning of a career and fall towards its end. But that is not what usually happens. Rather, according to a recent paper by economists at Moody’s Analytics, a consultancy, wages are lower for everyone in companies with lots of older workers. .
If the evidence suggested that ageing economies struggled primarily because of slow-growing labour forces and fast-growing pension costs, it would make sense to focus policy efforts on keeping people in work longer—by raising retirement ages, for example. But if, as seems to be the case, reticence to embrace new technologies is a bigger issue, other goals should take priority—in particular, boosting competition.
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