How Age Affects Productivity — And What Leaders Can Do About It

Worker productivity tends to slide with age for myriad reasons. Here’s how leaders can mitigate the risk.
age productivity

Aging workers make up an increasingly large portion of the American population. According to the U.S. Census Bureau, the population of those aged 45 to 64 grew 31.5 percent from 2000 to 2010, making the group more than a fourth of the total population. The trend is expected to continue, according to a population report from the U.S. Census. “By 2056, the population 65 years and over is projected to become larger than the population under 18 years,” the report said.

An aging workforce also influences economic metrics such as productivity and GDP. According to the National Bureau of Economic Research’s Bulletin on Aging and Health, “a 10 percent increase in the share of the population that is age 60 and above decreases growth in GDP per capita by 5.5 percent.”

Why is this?

Baby boomers came about after World War II, when soldiers returned home and contributed to a spike in fertility rates. As those children grew and had offspring of their own, the fertility rate dropped (from more than three children to less than two currently.) When fertility rates decrease, that means a smaller pool of talent for the future workforce. “To replace your society, if you think multiple generations out, you need to maintain a fertility rate of 2.1,” said Steve Nyce, senior economist at research and advisory firm Willis Towers Watson.

Baby boomers are living longer, too, meaning they need to work more to save for a long retirement, Nyce said. “There’s a lot of uncertainty out there [economically], and I think people are taking a cautious approach and continuing to work an extra year or two,” Nyce said.

The type of work baby boomers do also impacts productivity. Manufacturing’s influx of robotics, moves overseas and difficult nature of work means more boomers are now in service sectors, Nyce said. Although this means older workers have more employment options than previous generations, the nature of service work is less productive than manufacturing.

“In virtually all developed economies, the service sectors tend to have lower rates of productivity and productivity improvement than the goods-producing sectors,” according to “The Economic Implications of Aging Societies: The Costs of Living Happily Ever After,” a book Nyce coauthored along with Sylvester J. Schieber, an independent consultant.

Also, the older a worker gets, the less likely they are to continue their education. Continuing to renew skills is the key to remaining on top of industry knowledge, which contributes to being a highly productive and valued employee.

What can business leaders do to ease the transition of this workforce?

The implications of the aging workforce are likely to take place over the next decade. “This is really going to challenge employers to really think about how do I appeal to these older workers and millennials at the same time, because retaining those older workers who have all the career’s worth of experience will be really important,” Nyce said. The aging workforce has a lot of knowledge to pass down to younger workers. The trick is to delay retirement, keep workers productive and get the most out of valuable employees.

1. Create benefits programs tailored to older workers. When examining benefits offerings, think about what would appeal to older and younger workers, and have a mixture that tailors each offering to the types of employees the company wants to attract and retain, Nyce said. Older workers often need to care for their aging parents, so flexible work arrangements are a valuable benefit to offer. Also, with stagnant wage growth and rising health care costs, benefits that help ease financial burdens will go a long way, Nyce added.

2. Make these workers feel like they matter. Workers don’t always make the decision to retire based on money; sometimes they feel the company no longer wants them. To retain them, business leaders can look at how they structure work and communicate with employees. This will also yield higher productivity, Nyce said.

3. Renew the skills of older workers to help them stay on top of changing technology and ways of working. However, “business leaders have to be aware that the interests of older employees are different from younger employees, especially when it comes to personnel development,” said Thomas Zwick, professor and chair of human resource management and organization at University of Würzburg in Germany.

Zwick said he sees development programs being geared toward younger employees, but older workers aren’t interested in the same things. Workers who are just starting in their careers invest in content that helps with their prospects of promotion, whereas older workers are likely already toward the top of organizations. They’re likely more interested in improving social relationships and workflow, Zwick said. Age-specific development options could mean all workers get more out of programs, improving productivity and motivation.

4. Have millennials and older workers operate together. This transfers the tech skills of young workers and the valuable industry knowledge of older workers. Nyce noted that it’s especially important to find change agents who appeal to multiple generations and have them work together.

Lauren Dixon is an Associate Editor of Talent Economy.

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