Older workers maintain productivity

Survey shows that over-60s are not less productive and do not fuel youth unemployment by staying on the labor market

By André Julião  |  Agência FAPESP – The findings of a survey conducted every two years in 27 European countries and Israel dispel a number of myths regarding the impact of population aging on the economy.

The data collected since 2004 show that older workers are not less productive and that they do not fuel youth unemployment by staying on the labor market. At the same time, their health does not necessarily improve after they retire.

Axel Börsch-Supan, a researcher at the Max Planck Institute for Social Law and Social Policy, based in Munich, Germany, delivered a presentation on the survey to the FAPESP-Max Planck Frontiers of Science Symposium, cohosted by FAPESP and the Max Planck Society in November 2018, in São Paulo, Brazil.

The survey in question is known as SHARE, short for Survey of Health, Aging and Retirement in Europe, and is headed by Börsch-Supan. It is based on interviews with the same people over a long period, complemented by long questionnaires. It aims to understand how work, health and income are affected by growth in the number of people over the age of 65.

“Population aging is the challenge of the twenty-first century,” Börsch-Supan said. “In 2050, older people will outnumber the young in Europe. This creates all kinds of problems. Pensions will be costly, and people who are young now are going to pay for this, like it or not.”

According to estimates, over-65s will account for 28% of the European population by mid-century, up from 23% now.

In Brazil, the number of over-60s will triple by 2050, reaching 29.3% of the population, according to IBGE, the national census and statistics bureau.

“The pattern is the same in Europe and Brazil insofar as a larger proportion of the population are middle-aged than young. This will increasingly be the case, albeit less rapidly and intensely than in Europe. It affects Brazil to a significant extent, more so than in other countries such as Mexico,” Börsch-Supan said.

The inverted age pyramid is reflected in the ballooning cost of pensions and social security, an issue under discussion for some years in Brazil and now at the forefront of the reform agenda. In regional terms, the problem is not peculiar to Brazil, noted Antonio Carlos Campino, a professor at the University of São Paulo’s School of Economics, Administration and Accountancy (FEA-USP).

Campino cited a study by the Inter-American Development Bank (IDB), which points to similar problems in other Latin American and Caribbean countries. “The growing volume of expenditure on pensions is a major problem for governments and public finance, so a solution must somehow be found,” he told Agência FAPESP.

According to Campino, spending on older members of the population far exceeds spending on the young. In Brazil, for example, spending on over-60s was 3.8 times spending on children and adolescents aged 19 or lower in 2015 (R$ 19,705 per capita versus R$ 5,136 per capita).

“In Brazil, the consolidation of public primary education didn’t occur before most of the older part of the population began receiving retirement pensions,” he said. As a result, “economic development based on import substitution heightened the importance of the social security system while at the same time neglecting investment in education and health.”

Myths about aging.

Seven waves of data collection have been performed to date for the European SHARE survey. The numbers are impressive. Over 350,000 interviews have been conducted with 130,000 individuals in 39 languages, and more than 27,000 blood samples have been taken.

“You need to observe individuals throughout their life course. The survey has to look at several decades of change. You can’t simply compare young people today with older people today because they’re coming from different moments in history. Suffice it to recall that Brazil, for example, has experienced big changes in the last 50 years,” Börsch-Supan said.

For this reason, SHARE interviews the same people repeatedly as they age. The data collected cover economic conditions, family and social networks (how many individuals they talk to), cognitive skills and blood work.

The survey also attempts to assess work quality and performance. These factors are hard to measure, so the researchers’ sources include observations of workers collected by their employers. Five million observations have been analyzed thus far.

One of the conclusions is that older people do indeed make more mistakes in activities such as those involved in the automotive industry, but the mistakes made by young people are far more serious.

Analysis of these observations has also refuted a number of myths, such as the idea that older employees are less productive. “The survey shows that productivity remains fairly stable and may even rise as people get older,” Börsch-Supan said.

Another myth is that keeping older people on the payroll for longer will take jobs away from younger people. “In countries where many people retire later, there’s very little unemployment,” he said, adding that this is a good sign given the high cost of early retirement to the nation.

It is also often said that retiring is good for your health. According to Börsch-Supan, this is only partly true. “It doesn’t apply to academics, for example, but it makes sense for people who have spent their lives doing physically strenuous work,” he said.

At the same time, measurements of cognitive functioning made in all seven waves of SHARE point to a possible decline after retirement regardless of the kind of job the person did when active.

Memory loss among retirees is more significant in France than in Sweden or the United States, for example. The French retire earlier than the Swedes and Americans.

“If you just stay at home and watch TV – I’m thinking of an extreme case here – your cognitive capacity declines. This is a good reason to think twice before saying retirement improves health. It’s more complicated than that,” Börsch-Supan said.

He also stressed the importance of international comparisons in the effort to reach conclusions on the causes and effects of certain labor law interventions or of investment in health and retirement.