The CBI would have a point if older workers were less productive than younger ones. If this were the case then a mandatory retirement age would be an easy way for firms to get rid of less productive staff.
However, Jan van Ours has gathered evidence from Dutch manufacturers to suggest that productivity declines only slightly with age, on average. He finds that academic economists’ productivity - measured by publications in top journals - rises to the age of 50 and then only levels off, which suggests that experience (or the ability to exploit PhD students) can offset a decline in mathematical skills.
What’s more, even in pure physical activity, the drop-off in productivity is low. He cites Ray Fair’s estimate (pdf) that the time required to run half-marathons rises by only 1.1% a year on average between 55 and 65.
And van Ours estimates that whilst the productivity of Dutch manufacturing workers does fall after age 50, the drop is small and offset by lower wages.
This evidence suggests that it is not the case, on average, that 65-year-olds are low-productivity, high-cost workers that firms are better off without. So a mandatory retirement age, generally speaking, is not needed to weed out bad workers.
So much for averages. But what of selection effects? It might be that the sort of workers who’d like to work past 65 differ from the average. I suspect, however, that such effects cut both ways.
On the one hand, the people who want to carry on working will be more motivated than average, which points to them being more productive. But on the other hand, someone who hasn’t made money by 65 and needs to carry on working is likely to have poor productivity.
I suspect then, that there’s no harm in allowing people to work past 65. I just hope they don’t make it compulsory.