Aging and the Macroeconomy Long-Term Implications of an Older Population (2012) / Chapter Skim
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6 Aging, Productivity, and Innovation
6 Aging, Productivity, and Innovation
Pages 106-121
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From page 106... ...
It is worth remembering that small changes in productivity growth will lead to large improvements in living standards over time. There has been relatively little research on the impact of a changing age structure on overall economic productivity.
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From page 107... ...
Innovations in organizational structure and management practices and improved political and legal environments have also fostered significant productivity gains. While technological advance and other changes have played a key role in productivity growth, their rate and direction have varied greatly from decade to decade, and the pattern of change is not well understood.
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From page 108... ...
However, unlike the earnings data reviewed below, job experience has little value in predicting the maintenance of abilities over the long run except for complex jobs. Literature using other metrics for individual productivity also shows divergent results by age and metric.
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From page 109... ...
Their measure of productivity finds that older workers have higher productivity. Although the literature on productivity and behavior at the individual level provides weighty evidence on the impact of aging on many individual attributes, we need to be cautious about the application of those attributes to aggregate productivity.
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From page 110... ...
There is a substantial literature on the age distribution of producers of inventions, patents, publications, and other creative material. Historians of science have generally concluded that scientific output tends to rise steeply in the twenties and thirties, peak in the late thirties or early forties, and then trail off slowly through later years.
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From page 111... ...
. There is genuine concern on the part of the scientific establishment in universities as well as federal scientific agencies that the longer time for young researchers to enter their careers as productive scientists is due to institutional impediments.
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From page 112... ...
Other factors, such as education, support institutions, economic and social rewards, and religious institutions, tend to dominate the actual distribution of scientific output. This can be illustrated by examining the distribution of Nobel prize awards in chemistry and physics over the last century.
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From page 113... ...
Also, most urban school districts in the United States see high school graduation rates of only 50 percent. These indicators are a reminder of the vast potential supply of scientific and innovational talents that remains untapped in the United States and the rest of the world, and of the important determinants of technological advance other than age.
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From page 114... ...
A central issue in this context is the age distribution of productivity for the workforce. Changes in aggregate productivity arise from the inter action of the age distribution of productivity and the changing age dis tribution of the labor force.
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From page 115... ...
To generate estimates of the impact of a changing age distribution on productivity, the committee used the 1999-2001 age-experience curve as its age-productivity relationship in conjunction with the committee's estimates and projections of the distribution of the labor force by age (see Appendix A) for three different years, 2010, 2020, and 2030, and applied the estimates for males to all workers.
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From page 116... ...
There is some truncation bias, but this appears to make little difference to the estimates.3 Table 6-1 shows the calculated impact of the changing age distribution on the rate of growth of productivity over the 2010-2020 and 2020-2030 periods. The estimates suggest that the age composition effect is likely to be very small for all specifications and both periods.
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From page 117... ...
The estimates in Table 6-1 are slightly lower than this estimate because of asymmetries in the age distribution, but from an economic point of view the estimates are virtually identical. The impact of the changing age distribution on productivity is small fundamentally because the slope of the earnings curve at the current average age of the labor force is close to zero.
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From page 118... ...
His approach takes measures of productivity growth in major countries and combines them with estimates of the shares of the labor force in different age groups, using output data from the Penn World Table 6.0 and worker data from the International Labor Organization for decadal observations, the latter interpolated for 5-year intervals using population data from the United Nations. The total sample is 87 countries, while a more appropriate sample of countries for our purpose is limited to 21 OECD countries.
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From page 119... ...
Conclusion on Productivity The impact of changes in the composition of the labor force on productivity shows consistent results in all the committee's tests. Even though the numbers vary slightly depending on the technique, estimation period, and group, the estimates all indicate that the age composition effect on TABLE 6-2 Projected Impact of Changing Age Distribution on Productivity Using Three Aggregate Productivity Estimates, 2010-2020 and 2020-2030 Impact of Changing Age Distribution on Productivity (% change per year)
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From page 120... ...
The only exception is the linear productivity equation in Table 6-2, but this estimate should be discounted both because it is inconsistent with the earnings approach and because the quadratic approach has superior statistical qualities. Therefore, the bottom line is that the committee's estimates indicate that there is likely to be a negligible effect of the age composition of the labor force on aggregate productivity over the next two decades.
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From page 121... ...
Earlier NRC studies discussed issues in this area, and the present committee would note two measures that are particularly important. First, it is important to ensure that young researchers have access to federal grants.
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