The CBI has said it is disappointed by the government’s apparent decision to allow workers to continue working past the age of 65. Some recent research, however, suggests it shouldn’t complain.
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.
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.
I think the CBI's disappointed reaction rather betrays what they really believe 'work' is: Bad for you, and preferably to be carried out by other people.
Posted by: Neil | July 14, 2009 at 10:38 AM
This should not be allowed.. working after the age of 65 is not at all a good decision from CBI!
Posted by: Steve | July 14, 2009 at 10:40 AM
I think you mean, "the time required to run half-marathons *increases* by only 1.1% a year on average between 55 and 65"
Posted by: Gareth Rees | July 14, 2009 at 10:58 AM
According to the teacher's pension fund (whatever its called) teachers who retire at 60 last on average another 17 years. Those that retire at 65 not much more than 3.
There is of course the apparent situation that after retirement people go down hill quite quickly, and those that enter care homes suffer extremely rapid deterioration as they "know" they don't need to think for themselves anymore.
And of course the wife can't stand having you at home either.....
Posted by: kinglear | July 14, 2009 at 11:36 AM
Out of interest, what is the life expectancy for people who don't retire? (Anecdotally speaking, Christopher Lee is ancient.)
Posted by: Neil | July 14, 2009 at 11:57 AM
The CBI, to be consistent, should also insist that any board members over 65 retire immediately; that would cause a bit of a cleanout I think.
Posted by: william | July 14, 2009 at 12:00 PM
@ Gareth - thanks for spotting that; the correction's made.
@ Neil - I cited some evidence that retirement is weakly bad for health here:
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2009/07/retirement-health.html
Posted by: chris | July 14, 2009 at 12:06 PM
The chance would be nice.
Posted by: jameshigham | July 14, 2009 at 12:59 PM
The fairest way to set retirement age - and help pay for future care and pensions - would be to make it a percentage of average life expectancy and let it float up and down.
Posted by: Eric | July 15, 2009 at 09:53 AM
As a former Head of Personnel in the public sector, I took a pragmatic approach to those wishing to work beyond 65. We were in an area with quite high youth unemployment and a lot of outward population drift because there were limited job opportunities so I suggested to the managers that, in discussing an individual's wish to work on, they asked whether they felt comfortable with occupying a job that a school leaver or someone genuinely needing work locally could do. The minority wished to continue with appplying to work on.
Posted by: Richard T | July 16, 2009 at 08:48 AM
There is of course the apparent situation that after retirement people go down hill quite quickly, and those that enter care homes suffer extremely rapid deterioration as they "know" they don't need to think for themselves anymore.
Posted by: cheap supra shoes | July 17, 2009 at 03:08 AM
So Richard T the oldies were pressured to make way for unemployed youf. throw out experience for ?? what.
As most work does not involve vigorous physical activity - why were marathons mentioned?
As a retired at 67 and now age 74 who can bench press 70 Kg - can youi match this. And why not?
Posted by: john malpas | July 20, 2009 at 08:52 AM
And a lot of it reflects a switch from bank deposits to securities; foreigners “other investments” in the UK, http://www.watchgy.com/ mostly bank deposits, fell by £143.2bn in Q1. And of course there’s no guarantee such buying will continue.
http://www.watchgy.com/tag-heuer-c-24.html
http://www.watchgy.com/rolex-submariner-c-8.html
Posted by: Tag Heuer | December 27, 2009 at 04:23 PM