Wednesday, November 13, 2013
University of Michigan's Retirement Research Center has released a new paper on "Technological Progress and the Earnings of Older Workers." From the the abstract:
"Economists' standard model assumes that improvements in total factor productivity (TFP) raise the marginal product of labor for all workers evenly. This paper uses an earnings dynamics regression model to study whether, in practice, older workers benefit less from TFP growth than younger workers. . . . We find that although the earnings of younger workers track TFP growth 1-for-1, the earnings of older workes do not: we find for example, that a 60-year-old male's earnings grow only 85-90% as fast as TFP. Nevertheless, our analysis implies that in an economy with an aging labor force, gains from experience tend to outweigh older workers' inability to benefit fully from TFP improvement."