Do old people hurt growth?

By James Zuccollo 16/04/2015

A new paper (PDF) claims that ageing populations will hinder growth by both dis-saving and dragging down innovation, thus reducing productivity. Using a VAR model, they relate the age structure to measures of growth, saving, investment, and other macroeconomic variables over the 1990-2007 period. They use those coefficients to predict the effect of demographic change on growth rates in the current decade. The results are dramatic, predicting that an ageing population will knock over a percentage point off some countries’ growth rates.

In a ray of light, this morning’s FT (£) reported a study of over 15,000 German employees that examined the relationship between ageing and productivity. One of the authors is quoted saying:

As workforces age, employers are concerned that productivity will decrease. That is not so. What matters is not chronological age but subjective age.

The research suggests that older people are systematically excluded from training activities, and are relegated to less creative and meaningful work, which renders them less productive. As the workforce ages, that may begin to change. As it changes, the relationship between growth and age structures is likely to weaken.

0 Responses to “Do old people hurt growth?”

  • That is if older people can get paid work at all. And in many organisations older people get squeezed out by young managers, and when they go they take not only their skills and experience, but generally years of institutional memory too, which cannot be replicated in short order.

  • Hmmm. In physical roles, youth is an advantage. And institutional memory is really only an excuse to keep running poor systems.

  • Personally I don’t understand how any community (not just economy) can move forward without the contribution of all members. That Ashton: talk solutions, don’t make excuses.

  • The solutions are coming. New H&S legislation will make working in physical roles less of an issue for aging bodies.

    The system stuff is an endemic problem in NZ – we seem to value the person who knows over the person who knows how to find out how. Further, we overvalue institutional knowledge and undervalue system thinking and processes. This is likely a result of our “self made man” ethos and the huge number of small businesses where the boss “knows it all”.

    These are suggested reasons Maurice, not excuses. There is a subtle difference.

    We do as a country over-venerate age. This is seen in the sacrosanct nature of social welfare around the aged. Perhaps removal of this safety net would prompt more elderly to be more productive – even to take out student loans and study so they can do more creative and meaningful work.

    Disclaimer – I’m 53 and at that point where people are taking sideways glances at me and wondering when I’m going to shuffle along…

  • “This is seen in the sacrosanct nature of social welfare around the aged. Perhaps removal of this safety net would prompt more elderly to be more productive”
    Seems a bit draconian, in that many aged probably need some form of safety net: in physical terms full-time work may not be an option, for example. And let’s not even go into things like Alzheimers…

  • As may be Alison – I’m not advocating complete removal myself – just applying the same logic that is often used with unemployment and DPB. BTW, your statement implies that many DON’T need the safety net, surely?

    Alzheimers is a medical condition – it should be allowed for in the sickness benefit.

    Given national super is the single largest outflow from the social support budget, and given that the elderly are leaders in both wealth and personal happiness, while under fives are commonly found to be impoverished in both areas, and given that the elderly have NO age of retirement but are competing for employment with young people who don’t have the benefit of a guaranteed income pegged to CPI, perhaps – just perhaps – we should be looking at incentivising the elderly to perform better?