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Can the Elderly Support Themselves?

Can the Elderly Support Themselves?. By Elizabeth Foster. Vulnerability in the Labor Market. Common Explanations Age Discrimination Differentials in Education and Skills Fundamentally, about Employer Profit Maximization - Older workers are the least productive but most costly of employees .

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Can the Elderly Support Themselves?

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  1. Can the Elderly Support Themselves? By Elizabeth Foster

  2. Vulnerability in the Labor Market • Common Explanations • Age Discrimination • Differentials in Education and Skills • Fundamentally, about Employer Profit Maximization - Older workers are the least productive but most costly of employees

  3. Why are they so Expensive? • Post-WWII wage-structure in Developed Countries and Increase in Social Welfare Policies - Regular Wage Increases - Fringe Benefits • Vacation Time • Pension Plans • Health Insurance

  4. Developing Countries • Little State support for older population • The very poor can’t accumulate savings over their lifetime • Reliance on their children • Need to take advantage of the Demographic Dividend

  5. Case Study: Japan • Firms want to accumulate Tanôkô, workers with diverse skill sets and expertise • Employment System (LES) • Recruitment and training of new graduates • Non lay-off rule or implicit job security until contractual retirement age • Wage-System (SWS) • Originally worker salary generated largely from concept of age-based living wage. • Age-based living wage component on the decline since 1990s, in favor of work-based wage systems • Recognize need to reform and restructure systems

  6. Are the Elderly Really Less Productive? • Data shows no real consensus • BUT seems to be downward trend due to decrease in cognitive and physical functions • Most importantly, employers perceive a decrease in productivity • Industries value some skills more than others

  7. Employer Perceptions (van Dalen, Henkens and Schippers, 2010)

  8. Soft Skills vs. Hard Skills • Older workers demonstrate “soft” skills • Reliability • Loyalty • Customer-oriented • Younger workers demonstrate “hard” skills • Flexibility • Ability to adapt • Eagerness to learn new skills • Physical Capacity • In Today’s Economy, Hard skills > Soft skills

  9. Challenged by Technological Changes 812 M. Malul / The Journal of Socio-Economics 38 (2009) 809–813 Fig. 2. The impact of change in the technology on the employment of younger and older individuals. The Impact of change in technology on the employment of younger and older individuals (Malul, 2008)

  10. Labor-Capital Relations • Therefore, employers believe older workers are less productive than their younger coworkers but due to the wage-structure, older workers are more expensive • Targeted in workforce reductions in order to maximize profits • If searching for employment after age 55, the elderly are less likely than younger workers to find one or one in which they earn comparable salary

  11. Will Older Workers become more Attractive in the Future? • Older workers are healthier and better educated then before, delaying the decline in cognitive and physical functions and reducing health costs • Rise of the service sector, which values “soft” skills • BUT, technology plays an increasingly important role and the ability to adapt to rapid technological change and to learn new skills might outweigh the benefits of the improvements in health and education and the rise of the service sector

  12. Conclusion • As the old-age dependency increases worldwide, the elderly are under increasing financial pressure • The structure of the labor market and modern skill preferences favor younger workers over older ones • Policy interventions • Pension reform • Provision of subsidies for employers who hire older workers • Promotion of the continued use of older technology and thereby capitalize on older worker’s existing knowledge

  13. References • Cameron, Lisa A.; Cobb-Clark, Deborah A. (2002), "Old-Age Labour Supply in the Developing World", Applied Economics Letters v9, n10 (August 2002): 649-652. • Koeber, Charles; Wright, David W. (2001), "W/age Bias in Worker Displacement: How Industrial Structure Shapes the Job Loss and Earnings Decline of Older American Workers", Journal of Socio-Economics v30, n4 (2001): 343-352. • Lahey, Joanna N. (2008), "Age, Women and Hiring", The Journal of Human Resources, vol 43, no. 1, pp 30-56 • Longman, Phillip. (2010), “Think Again: Global Aging”, Foreign Policy (November 2010) • Malul, Miki, (2009), "Older worker's employment in dynamic technology changes", The Journal of Socio-Economics, vol. 38, pp. 809-813. • Munnell, Alicia and Steven Saas. “Will Employers Want to Emply Older Workers” Working Longer: The Solution to the Retirement Income Challenge, pp: 92-116 • Van Dalen, Hendrik; Kenehenkens; JoopSchippers, (2010), "Productivity of Older Workers: Perceptions of Employers and Employees", Population and Development Reviewvol 36, no. 2, pp309-330. • Watanabe, Susumu (2000), "The Japan Model and the Future of Employment and Wage Systems", International Labour Review v139, n3 (2000): 307-333.

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