Ageing of the labour force within OECD countries : what are the implications for labour productivity and growth?

Abstract

The projected fall in the working age population growth rates and ageing within the workforce in the next few decades have various implications for labour productivity, standards of living and economic growth. Literature suggests a negative correlation between changes in labour force growth rates and changes in productivity growth This correlation implies that in the coming decades the slowdown in the working age population rates will be accompanied by a higher growth in labour productivity and economic growth. From an individual aspect, fluid abilities fall as a person ages while crystallised abilities remain constant throughout the working life cycle. However, rising educational attainments and high human capital accumulation among future old-age working cohort potentially lead to higher long run growth rates of productivity. In this sense, higher wages at older ages will be justified. Ageing within the workforce is the ultimate result of increased standards of living, lower fertility rates, higher female labour force and educational attainment that took place in the recent decades mainly as the outcome of economic growth.