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Skills and Work Performance

We study changes in productivity determinants in an integrated common framework that projects the composition of skills by age, sex and birth cohort, based on data on the changing importance of skills combined with projections of actual skills.

Productivity and skills

Foreseeing the development in skills and capacities among those aged 50 and above is paramount for societies that are ageing more profoundly than ever before. Postponed retirement is the most important policy action to maintain stability between the economically active and inactive population (OECD 2006; UN 2007). The ability to effectively raise employment at older ages depends on a thorough understanding of the levels, trends and determinants of age-specific productivity potential. Several studies (McEvoy and Cascio 1989; Skirbekk 2008a) conclude that on average the age-productivity curve tends to be hump-shaped, where initial years of labour market experience boosts working capacities, while declines in certain cognitive skills (such as short term memory and processing speed) and health can lower productivity towards the end of the working life. Although the importance of cognitive abilities in the labour market is increasing, little is known about the prevalence of these skills in the coming decades. Evidence on life cycle changes of cognitive abilities suggests that these abilities tend to follow relatively similar age patterns in different cultures and for both genders (Avolio and Waldman 1994; Baltes and Mayer 1999; Deary et al. 2000; Maitland et al. 2000; Park et al. 1996). Cognitive abilities (both fluid and crystallized) also tend to improve according to cohort lines (Finkel et al. 2007). We can therefore use demographic based forecasting method to illustrate likely futures of these skills.

If later-born cohorts are increasingly healthier and more cognitively capable, this will imply that older individuals are likely to remain productive in the workforce to a higher age. Although cohort effects were presented years ago by Quetelet (1842), the cohort dimension has been ignored in most contemporary investigations of productivity and demographic change. Several important productivity determinants among seniors do change along cohort lines, including mental ability levels, health, educational attainment and work capacities (Romeu Gordo 2009; Skirbekk 2008b). We study the changes in these productivity determinants in an integrated common framework that allows us to project the composition of skills by age, sex and birth cohort.

The shape of the age-productivity profile differs according to the age variation in the skills relevant to the work (Skirbekk 2008b; Warr 1994). Changes in the industrial structure and less physically intense work in traditionally physically demanding jobs have given way to non-routine interactive and analytical work (Spitz-Oener 2006). The magnitude of computerization, automatization of work tasks, trade, specialization and skill-biased technical change may imply a continued decrease in the demand for low skilled workers and an increasing relevance for cognitive performance and higher education in the coming decades (Elliot 2007; Kavanagh and Doyle 2006; Juhn et al. 1993; Schmidt and Hunter 1998). Based on data on trends in the changing importance of skills combined with projections of actual skills, we study plausible future developments in the labour market.

References

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Last updated: 05 Sep 2011