Employees: too expensive at 50? The age component in wage-setting

As the population ages, the labour demand for older workers has become a major social and economic challenge. Wage profiles are linked to age in all European countries to a varying extent but the remuneration path is seen to be continuing to rise for the over-50s in Belgium, whereas it flattens out until the date of retirement in the Scandinavian countries, the Netherlands and Germany. Wages keeping pace with increasing seniority is not economically problematic if this reflects a higher level of productivity. As labour productivity cannot be observed directly, an assessment is made of how age variation among companies’ employees affects firms’ output. The econometric results for Belgium show that a higher percentage of employees aged 50 and older generally tends to weigh on corporate profitability. This does not have to be the case : their productivity can be boosted as a result of more training efforts, measures that aim at adjusting workplaces, including ergonomics, and a better organisation of work.