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Older Employees Breathe New Life Into Europe’s Labor Market

When entrepreneur Kim Diaz opened a bar-restaurant in Barcelona four years ago, he adopted a strict hiring policy: only workers aged 50 and above.

The bet has paid off. Older staff are punctual, polite and hardworking, the 51-year-old said, and their professionalism has proven a hit with younger customers.

“We’re talking about waiters who enjoy their jobs, remember exactly how you take your coffee in the morning, how you want your beer without a head and your Coke with just one ice cube. These are values that we’ve been losing in hospitality recently,” Mr. Diaz said. His average employee is 54.

Across a rapidly aging Europe, employers are finding ways to keep older staff on the job for longer, or adding new ones.

Workers aged 55-74 accounted for 85% of employment growth in the eurozone between 2012 and 2018, according to the Organization for Economic Cooperation and Development, a think tank for mostly rich countries. Around 10 million jobs were created during that period.

The trend upends the usual thinking on labor markets. Normally, it is cheaper and more-flexible younger workers that are coveted. But the large and highly educated baby-boomer generation has accumulated skills that are tough to replace, employers and economists say.

Older staff are punctual, polite and hardworking.

The shift toward older workers comes as Europe approaches a demographic cliff. Sixteen percent of the working-age population of the region’s currency union, aged 15-64, will be lost by 2050 relative to the region’s total population, according to a paper published in June by the European Central Bank. That is double the share of the U.S. working-age population that will be lost over the period.

To stave off demographic decline, European governments and businesses are hustling to boost employment and productivity among older workers.

Mindful of a rapidly aging workforce, executives at German auto maker BMW AG tried an experiment at a factory in Bavaria a few years ago. They staffed an assembly line exclusively with older workers, with an average age approaching 50. By making small tweaks—ergonomic chairs, less-rigid wooden floors, lenses to magnify smaller parts—BMW transformed the line into one of the factory’s most efficient. The total outlay: around €40,000.

“We found that older workers had the same productivity as younger ones, and in terms of quality they were even better,” said Jochen Frey, human-resources spokesman for BMW in Munich. The line’s design has since been replicated in BMW factories across Germany and beyond.

Economists had until recently assumed that workers’ productivity peaked somewhere between the ages of 30 and 45, before declining rapidly after about 60. But some recent research challenges that assumption: Examining large data sets, economists led by Axel Boersch-Supan at Munich’s Technical University found that the productivity of manufacturing and service-sector workers doesn’t change much through age 65. While labor-market success for older workers is positive for Europe’s economy, it could widen an existing gap in unemployment rates between old and young Europeans, at least in the short term. Europeans in their 20s have struggled to gain a foothold in the workforce since the financial crisis.

Those early losses weigh on the lifetime productivity of young workers and intensify concerns of a lost generation in Europe. The under-25 unemployment rate is around 16% in the eurozone, double the rate in the U.S. It is above 30% in Italy and Spain. That reflects labor laws that favor insiders over new entrants, as well as lower skill levels among young workers and weak demand in parts of the region.

In southern Europe, younger workers face a double whammy: The debt crisis pushed up youth unemployment especially, whose jobs were less protected. But the recovery has benefited mainly older workers. That is particularly worrying as Europe’s economic recovery stalls, potentially leaving large numbers of young workers out in the cold.

Meanwhile around three-quarters of Germans aged 55-64 are working, up from 59% in 2008, according to OECD data. In Italy and France, the employment rate of 55-64 year-olds has risen to 55%, from 35% and 40% respectively before the financial crisis. The employment rate of older Americans has held steady at around 65%.

The influx of older workers means that the eurozone’s labor force is now 2% larger than before the crisis, defying predictions it would shrink. That has helped lift the region’s recovery from a deep financial crisis, making it easier for firms to fill vacancies and for governments to plug holes in public coffers.


Tom Fairless, WSJ

Nathan Allen contributed to this article. Full article:




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