hero working papers

Age, Technology and Labour Costs

Number: 309
Year: 2006
Author(s): Francesco Daveri and Mika Maliranta
Is the process of workforce aging a burden or a blessing for the firm?

Our paper seeks to answer this question by providing evidence on the

age-productivity and age-earnings profiles for a sample of plants in three

manufacturing industries (forest, industrial machinery and electronics) in

Finland. Our main result is that exposure to rapid technological and managerial

changes does make a difference for plant productivity, less so for wages. In

electronics, the Finnish industry undergoing a major technological and

managerial shock in the 1990s, the response of productivity to age-related

variables is first sizably positive and then becomes sizably negative as one

looks at plants with higher average seniority and experience. This declining

part of the curve is not there either for the forest industry or for industrial

machinery. It is not there either for wages in electronics. These conclusions

survive when a host of other plausible productivity determinants (notably,

education and plant vintage) are included in the analysis. We conclude that

workforce aging may be a burden for firms in high-tech industries and less so in

other industries.

Keywords: Aging, technology, TFP, wage determination, Finland, new economy, growth
JEL codes: D24, J24, J31, E60