Older Americans’ prospects in the workforce are generally positive — except in the financial sector, where aging workers are experiencing sharp declines in productivity and profitability.
That’s according to Geoffrey Sanzenbacher, an associate professor of economics at Boston College, who published a brief assessing recent studies by the college’s Center for Retirement Research to determine the viability of older workers now and in the future.
Sanzenbacher, a research fellow at the Center, sees cause for “tempered optimism.” It’s not simply an academic exercise; many researchers agree that the best way to ensure an adequate retirement is to remain in the workforce longer.
Worker Productivity and Profitability
Sanzenbacher analyzed recent CRR studies to determine whether older workers remain productive and profitable for their employers, what employers’ views and practices are regarding older workers, and whether older workers’ skills will be a good fit for jobs in the future.
To determine the productivity of older workers, CRR researchers used several data sets, including restricted Census data, to track businesses over time. They analyzed revenue, payroll and employee age. First, researchers estimated worker productivity, defined as revenue divided by the number of employees, for various industries and job types.
Overall, the results are positive, according to Sanzenbacher, who says there is “no clear evidence” that older workers are less productive. In his brief, Sanzenbacher estimates the effect on productivity — or revenue per worker — as the share of older workers increases.
In the management category, revenue per worker is estimated to increase by $317 as older workers are added. In manufacturing, a sector where researchers were able to perform a more rigorous analysis, there is an increase in productivity of $158 per worker. Most other sectors see smaller gains in productivity from older workers.
Shocking Finding on Financial Workers
But seven sectors, including finance, real estate, health care and education, see declines in productivity in Sanzenbacher’s estimate. Most striking is finance, where a productivity drop of $630 per worker is projected as the share of older workers increases.
Asked about this stunning figure, Sanzenbacher says in an email that the estimates are just that — estimates. Citing a CRR study, he says the financial industry results were surprising because math skills don’t decline early.
“That being said, to the extent that finance relies especially on analyzing fast changes to the market, or incorporating brand new ideas into one’s thinking, these are skills that do decline naturally with age,” he says.
Real estate saw the second biggest estimated decline in productivity for older workers, down $99; followed by health care, $31; and education, $22.
Sanzenbacher admits he is “somewhat at a loss” to explain the projected productivity declines for real estate and education, although he speculates the factors at work in the financial sector may also be present.
“On healthcare, it is easy to imagine that declines in physical strength could play a role,” he says.
Modest Declines in Older Worker Profitability
Sanzenbacher also estimated the effect on profitability, or revenue per dollar of payroll, from increasing the share of older workers. Here, most industries saw modest declines because older workers tend to have higher pay, he says.
And here, again, older workers in finance had a vastly greater decline in profitability — down approximately $12 per worker.This compared with $2.10 for real estate, the second biggest estimated decline; and $1.83 for the arts, next in line.
In most industries, the results show “no clear difference” in profitability between younger and older workers, Sanzenbacher says. In manufacturing, where researchers performed a more sophisticated analysis, there was no evidence of lower profitability for firms with older workforces, he says.
The bottom line, Sanzenbacher maintains, is that older workers are at least as productive as younger ones, and in most cases older and younger workers are indistinguishable in profitability.
Asked what the finance industry can do to mitigate a decline in older worker productivity, Sanzenbacher recommends placing those individuals in positions where they can lean on their experience.
“As individuals age, their experience generally allows them to more than make up for gaps in quick thinking,” he says. “To the extent this doesn’t seem to be happening in finance, it could reflect that for some reason this experience isn’t being leveraged.”
What are Employers Looking for?
In the second part of his brief, Sanzenbacher found that employers’ views of older workers broadly align with the findings of the CRR productivity study. For example, in the category of professional workers, 54% of employers surveyed said older workers are as productive as younger workers, and 45% said older workers are more productive.
On worker cost, a measure of profitability, 58% of employers said professional workers are equally costly. However, a sizeable minority of employers, 39%, said older professionals are more costly.
To assess how employers act toward older workers, CRR researchers looked at ads on RetirementJobs.com, which Sanzenbacher says is the only major job posting site targeted to individuals ages 50 and over. The ads include postings to the site by employers directly targeting older workers, and ads fed to the site from CareerBuilder.com by employers who are targeting the general job market but also including older workers.
The results were mixed. Salaries on RetirementJobs are “significantly” higher than those on CareerBuilder and are more likely to be full-time positions. But they are less likely to have health or retirement benefits.
When the indirect ads from CareerBuilder are removed from the equation, the available jobs are of much lower quality. The RetirementJobs direct ads, which target only older workers, offer significantly lower wages, less full-time work, more temporary work, and fewer benefits.
Financial advisors can help older workers whose jobs lack retirement plans by pointing them to IRAs or a solo-401(k) for independent workers, according to Sanzenbacher.
To close the health insurance gap, advisors should help clients under 65 access the Affordable Care Act marketplaces and identify plans that serve older individuals well, he says. The biggest gap in the support system for older workers is that long-term care insurance is not provided by Medicare, and the private market does not offer it at a rate that reaches many people, he says.
Hope for the Future
What does the future look like for older workers? CRR researchers examined the jobs older workers are doing today and compared them with Bureau of Labor Statistics projections on the how prevalent those jobs will be in 2030. Researchers also assessed older workers’ skills with jobs expected to be available in 2030.
The CRR study found that many jobs that older workers currently fill will decrease in number by 2030, but older workers have the skills needed for many jobs projected to be in demand at that time.
“In other words, those jobs older workers can do are apparently not going away, even if the ones they are currently doing appear to be becoming less common,” Sanzenbacher says.
“Older workers have the advantage of experience. So, moving into positions that emphasize experience is key,” he says. “Remaining on the frontier of technology is also key, and this is something that must be done constantly. As a 40-year old, I have made it a point to at least use new tools like ChatGPT occasionally so as not to fall behind.”
Although he did not address age discrimination in his brief, Sanzenbacher concedes that it remains a problem for older workers. Despite laws against it, proving discrimination is difficult, and many cases brought before the federal Equal Employment Opportunity Commission do not result in a judgment for the plaintiff, he says.
In a four-decade career in journalism, Ed Prince has served as an editor with many of New Jersey’s leading newspapers, including the Star-Ledger, Asbury Park Press and Home News Tribune.
