Training and Labour Market Outcomes of Older Workers: Evidence from Eleven EU Countries

Population ageing, together with low economic growth, has put pressure on the financial equilibrium of many pension systems in Europe and other industrialized countries, forcing governments to increase the average retirement age. An extended working life – combined with the rapid technological progress taking place in many sectors – is likely to render the skills older workers attained at school obsolete. In this context, lifelong investment in training is a key strategy for increasing, or at least limiting the decline in, the productivity of older workers.

When analysing older workers, it is particularly relevant to distinguish between general and specific training. General training develops transferable skills that the trainee can bring to another firm, while specific training improves skills targeted to the firm in which the trainee works. Therefore, general training may make older workers more likely to delay retirement by increasing the chances that they switch to another job or exit unemployment.

In our recently published paper ‘Training and wages of older workers in Europe’, we investigate the association between training activities undertaken by workers aged 50 plus and their wages, in eleven European countries. We consider workers’ wage as an approximation for their productivity. We additionally look at whether participating in training activities at older ages increases the probability of remaining employed. Our analysis relies on data from the Survey of Health, Ageing and Retirement in Europe (SHARE). This is one of the first studies to investigate the labour market effects of training older adults from an intentional perspective. With few exceptions, previous works either analysed single countries or used cross-country data but did not focus on older workers.

For most countries including Denmark, Sweden, Belgium, the Netherlands and Switzerland there is no evidence of a training wage premium. For other countries, namely Austria, Germany, Greece, and Italy, we do find a positive training wage premium; however, these results should be taken with caution and are likely to be overestimated due to data limitations. Interestingly, older workers undertaking training have lower probabilities of becoming unemployed or retiring from the labour market. 14% of untrained workers who were interviewed in the first wave of SHARE (year 2004) reported to have recently moved to retirement when they were re-interviewed in the second wave (year 2006), compared to only 8% of trained workers; in the same period, 3% of untrained workers became unemployed, compared to 2% of trained workers.

This study suggests that training can be effective in limiting the premature exclusion of older workers from the labour market. When interpreting the results of no training wage premium in most European countries, one has to acknowledge that wage rigidity may be strong in the case of older workers. Thus, measures of productivity other than wages could be more informative for studying the effect of training on older workers’ productivity.

This post has been jointly written by Michele Belloni and Claudia Villosio, senior researcher of LABORatorio R. Revelli – Centre for Employment Studies (Turin, Italy) and member of the board of directors.

References:

Belloni, M. and C. Villosio, ‘Training and wages of older workers in Europe’, European Journal of Ageing, doi 10.1007/s10433-014-0327-7. Forthcoming in special section on Work and Retirement, 2015.


This entry was posted in Ageing, Pensions, Welfare by Michele Belloni. Bookmark the permalink.
Michele Belloni

About Michele Belloni

Michele Belloni, Ph.D., is a post-doctoral researcher at the Department of Economics, University Ca’ Foscari of Venice. He is a fellow of the Network for Studies on Pensions, Aging and Retirement (NETSPAR, Tilburg University), the Center for Research on Pension and Welfare Policies (CeRP-Collegio Carlo Alberto) and a member of the Survey of Health, Ageing and Retirement in Europe (SHARE) working group. His research interests include Ageing, Health economics, Labor economics and Demography. He participated in various research projects financed by the European Commission, NETSPAR, and the Italian Ministry of Labor.

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