Ageing, productivity and wages in Austria

Bernhard Mahlberg, Austrian Institute for Industrial Research
Inga Freund, Vienna University of Technology
Jesús Crespo Cuaresma, Vienna University of Economics and Business
Alexia Fürnkranz-Prskawetz, Vienna University of Technology

Current demographic developments in industrialized countries and their consequences for workforce ageing challenge the sustainability of intergenerational transfers and economic growth. A shrinking share of the young workforce will have to support a growing share of elderly, non-working people. Therefore, the productivity of the workforce is central to a sustainable economic future. Using a new matched employer-employee panel data set for Austrian firms spanning the period 2002-2005, we study the relation between the age structure of employees and labour productivity as well as wages at the firm level. These data allow us to simultaneously account for socio-demographic characteristics of the employees as well as firm heterogeneity in order to explain labour productivity and earnings. Our results indicate that firm productivity is not negatively related to the share of older employees in the firm. We also cannot find evidence for an overpayment of older employees. On the contrary, for the service sector the results show a negative association between wages and the share of elderly. Furthermore, we find a negative relationship between the share of young employees and labour productivity as well as wages, which is more prevalent in the industry and construction sector.