Technical Progress and Early Retirement* (original) (raw)

Aging, technology and productivity

2005

The possibly negative productivity counterpart of an aging workforce at times of fast technical change is often seen as an important policy issue. We use Finnish plant data constructed by linking various registers of firms, plants and individuals to test whether plants employing an older labor force have suffered productivity shortfalls compared to other plants during the 1990s through the early 2000s -the new economy period -while controlling for other plant productivity determinants, such as plant age, size and turnover rates. Our estimates indicate that this has been the case. In the electronics industry, the seniority-productivity profile at the plant level reaches a peak in the sixth year of tenure, but then productivity dramatically falls by a cumulative 40% in the following five years. The declining part of the curve is instead either absent or more delayed in time, and definitely less steep for the other manufacturing industries. The age-earnings relation is instead usually concave but upward sloping. The discrepancy of results for productivity and wages is consistent with Lazear's theory of deferred payments. It also suggests that the practice of exploring the relation between plant or worker characteristics and wages as if an ageproductivity relation were investigated may be misleading.

Age, Technology and Labour Costs

SSRN Electronic Journal, 2000

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 ageproductivity 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.

Statutory Retirement Age and Endogenous Human Capital Depreciation

As societies age in most industrialized countries, reforms of the pension systems have become a central issue on the political agenda. A widely discussed proposition is to extend working life. An important implicit presumption of this proposition is that demand for older workers will continue until they reach the higher statutory retirement age. However, in most OECD countries the effective retirement age is well below even the present statutory retirement age. A major reason for this phenomenon may be the endogenous depreciation of human capital. Since new technologies are introduced continuously, workers have to adjust their skills permanently. If workers do not keep up with this process, their employability decreases. We analyze these effects by using a putty-putty vintage model with heterogeneous agents. While workers with flexible technological skills efficiently use any technology, workers using vintage-specific skills are affected by the depreciation of their skills. Economic retirement is endogenously determined by the scrapping time of a human capital vintage. Hence, retirement age is not a political variable. While increasing speed of technical progress will reduce economic working life, more intense international competition and outsourcing have no negative effects. Higher spending on education will increase the retirement age of workers with inflexible skills only if labor inputs are complementary. If the elasticity of substitution is close to one, higher spending on education will reduce the number of unemployed but not the effective economic retirement age.

Directed technical change: A macro perspective on life cycle earnings profiles

2017

We propose a new macroeconomic mechanism for generating patterns in age-earnings profiles based on directed technical change. The mechanism does not depend on changes in the human capital of the individual; rather differences in the human capital shares of age groups affect the profitability of developing age-specific technologies, biasing innovation toward improving the productivity of workers whose cohorts provide large shares of the labor force's human capital. The theory should be taken as supplemental to (rather than replacing) human-capital-based theories of age-earnings profiles. Using recently developed data and human capital estimates, we simulate reductions in wages due to age-biased directed technical change over workers' lives for most of the world's nations over two centuries. Our simulations indicate that age-specific directed technical change contributes to wage concavity for the average country by cohort group. Because younger workers make up a larger sha...

Vintage Effects, Ageing and Productivity

Research Papers in Economics, 2012

We provide new empirical evidence on the link between age and productivity using a transitional context. Building on a model of skill obsolescence, we assess the long-term adjustment process following a sudden change in skills needed in production that severely worsened older workers' labor market situation. The model implies that (a) the devaluation of skills should affect highly educated older workers more severely (b) the disadvantage should disappear over time as newer cohorts acquire more suitable human capital, and (c) the timing should differ among firm ownership types, reflecting the inflow of modern technologies and practices. Rather than focusing on wage differentials, we estimate the firm-level productive contribution of older relative to younger workers differentiated by education level. To assess long-run trends, we adapt the augmented production function methodology developed in international literature and apply it to a linked employer-employee dataset from Hungar...

Endogenous Technical Change and Skill Biases in Employment Opportunities

2000

In this paper we present a model that addresses the issue of the uneven distribution of employment opportunities over low-and high-skilled workers in a context of skill-biased endogenous technical change. In our model, technical change consists in part of product innovation. There is also process innovation to the extent that new products can be produced in two different ways, either using high-skilled workers, or using low-skilled workers after adapting the production process of a new product. The model combines elements from Krugman's (1979) North-South framework, life-cycle hypothesis and Aghion and Howitt's (1992) work on creative destruction. We show that from a growth point of view, lowering the relative wages for low-skilled workers does indeed reduce unemployment in the short run, as expected, but it also lowers growth. This is reminiscent of contention that moderate wage growth makes for slow technical change.

What do tests of the relationship between employment and technical progress hide

PSL Quarterly Review, 2020

R The debate about whether technical progress causes technological unemployment, as the Luddites argued in the early 19 th century, has recently resurfaced in the context of new technologies and automation and the so-called Fourth Industrial Revolution. We review the main issues and then consider in detail the studies of Autor and Salomons (2017, 2018). They find that after both direct and indirect effects are accounted for, technical change is, on the aggregate, employment-augmenting. They find no evidence that technical change (proxied by the growth of productivity) reduces employment growth. We demonstrate that the regressions they estimate are problematic because they approximate an accounting identity. One or two variables in the identity (output growth or both output growth and capital growth) are omitted, which implies that the coefficient of productivity growth suffers from omitted-variable bias. As the omitted variable is known, we can have a good idea of what the statistic...

Technological and Organizational Change and the Careers of Workers

Journal of the European Economic Association

This paper investigates the effects of technological and organizational change (T&O) on jobs and workers. We show that although T&O reduces firm demand for routine relative to abstract task-based jobs, affected workers do not face higher probability of non-employment or lower earnings growth than unaffected workers. Rather, firms that adopt T&O offer routine workers retraining opportunities to upgrade to more abstract jobs. Older workers form an important exception: T&O increases the risk that they permanently withdraw from the labor market and reduces their earnings, regardless of the tasks they performed in the firm prior to T&O.

Has technology hurt less skilled workers? A survey of the micro-econometric evidence

Working Paper Series

There is a growing concern in advanced countries that the position of less skilled workers has deteriorated, either through their ability to secure jobs and/or their ability to earn a decent wage. Some have linked this decline to modern computing technologies. This paper surveys the evidence on the effects of technical change on skills, wages and employment by examining the micro-econometric evidence (we take this to include studies at the industry, firm, plant and individual levels). We focus on over 70 empirical studies that have used direct measures of technology (rather than associating technology with a residual time trend). We first point to three basic methodological problems relating to endogeneity, fixed effects and measurement. Our survey comes to the following tentative conclusions: (i) there is a strong effect of technology on skills in the cross section which appears reasonably robust to various econometric problems; (ii) there is a strong effect of diffusion of technologies on wages in the cross section which is not robust to endogeneity and fixed effects; (iii) at the firm level product innovations appear to raise employment growth, but there is no clear evidence of a robust effect (either positive or negative) of process innovations or R&D on jobs.