The Enigma of Declining Productivity

It’s probably a good idea not to jump to too many conclusions, but a recent study has shown that when older workers are replaced by younger workers, productivity declines. At best, there’s a correlation. At worst, there's something resembling a causation.

The reasoning is simple. Older workers have more experience and know more. Younger workers, especially millennials, have less work experience and know less. When the elderly retire, to be replaced by the younger, productivity suffers. Or, so researchers have hypothesized.

Is this true at all times and in all places? Or is it more true for today’s millennial generation, a group that has been derided for its inability to launch, its defective work ethic and its having been indoctrinated with politically correct swill?

Of course, no one really makes this correlation, but today’s youngsters have been fed a diet of socialist propaganda mixed with encouragement to take time off and to find work/life balance. Surely, these bad attitudes must influence their productivity? Isn't that the point of the indoctrination.

In any event, Greg Ip reported the story in the Wall Street Journal:

Rapid retirements deprive companies of critical experience and knowledge, which undermines productivity across the entire economy. Demographics may thus be a critical factor in why the current economic expansion, which began as the first baby boomers qualified for Social Security, is the weakest on record.

One hastens to mention that in the Age of Obama, what did you expect? Given current government policies, no one should be surprised that the economic recovery is the weakest on record. And given the fact that these millennials are staunch supporters of Obama, thus true believers in Obama as Messiah, no one should be surprised that they are not very hard workers. They have high self-esteem, do not believe in competition and expect that the government will do it all for them.

The authors of the study attribute it all to experience. Which certainly makes sense. The more experienced you are, the more you know. The more you know the better and more efficiently you work. Better yet, the more experienced you are, the more you can guide younger workers.

Ip writes:

The authors note: “An older worker’s experience increases not only his own productivity but also the productivity of those who work with him.” All else equal, experienced workers are more productive. One study found that productivity peaks at age 50, when productivity is 60% higher than for the average 20 year old.

A journeyman carpenter doesn’t just work faster than an apprentice; he also helps the apprentice learn the tricks of the trade. New doctors diagnose patients more accurately under the tutelage of experienced practitioners. A rookie salesman learns the territory faster in the company of longtime veteran.

But, you might have thought, there is a downside to aging:

Of course, aging can also cut in the opposite direction. Older workers may be slower to adapt to new technology. If laid off from a dying industry, their experience may be irrelevant to a new one. Older workers are more likely to suffer from injury or illness and less likely to have a college degree.

But these disadvantages have shrunk: The average 60-year-old in the 2000s was as healthy as the average 55-year-old in the 1970s, and in many occupations, cognitive skill matters more than physical stamina.

You would think that younger workers would be more tech savvy, thus capable of doing more with less effort. But it might well be that younger workers waste more time on techno gadgets that add little to productivity.

At the same time, younger workers should have more stamina, a greater ability to stay up all night and to work 100 hours a week.

One must add, because no one else is going to say it, but the younger generation is more gender-diverse. One does not know whether young women, trying to balance work life and home life, diminish productivity. And one does not know whether young men, having been fed the gospel of work/life balance are doing the same.

The studies offer suggestions and an intriguing correlation. They do not give us a definitive answer to the enigma of lost productivity:

The productivity slowdown is a puzzle. Businesses appear reluctant to invest due to financing constraints, a dim sales outlook or a paucity of exciting new innovations. The new research suggests retirements could be part of the story. By applying their state-level findings to the whole country, the authors estimate that aging will reduce growth by 1.2 percentage points between 2010 and 2020, with two-thirds of the effect attributable to reduced productivity.

How precise is the correlation? Not very precise at all. Ip notes the following:

To be sure, the precise magnitude can be debated; most countries, regardless of demographic profile, have suffered a productivity slump. 

This datum would suggest that while age and experience count, other factors count also.

As for the solution, some suggest that the best approach is to discourage older employees from retiring. But, if that happens, companies will have fewer open positions for younger employees. This solution will tend to increase the unemployment rate for young people. This will mean more camping out in Mom and Dad’s basement, less partying and less sex.