Aging and Productivity: Evidence from Piece Rates

22 Pages Posted: 20 Oct 2012

See all articles by Tuomas Pekkarinen

Tuomas Pekkarinen

Aalto University; Institute for the Study of Labor (IZA); VATT Institute for Economic Research

Roope Uusitalo

Uppsala University - Department of Economics; IFAU - Institute for Labour Market Policy Evaluation; Government of the Republic of Finland - VATT Institute for Economic Research; IZA Institute of Labor Economics

Date Written: October 20, 2012

Abstract

We evaluate the effects of aging on productivity using piece-rate earnings as a proxy for worker output. Our data contain the population of Finnish blue collar workers in 61 different industries during 1990-2002. A unique feature of the data is that we can observe the exact hours worked on piece rates and on fixed time rates as well as earnings under both performance schemes. We account for the selection into piece rates by using firm-level changes in pay systems as instruments for the probability of working on piece rates. A subset of workers also receive both piece rates and time rates within the same quarter. For these workers, we can directly compare the age profile of hourly earnings under piece rates and fixed rates. The results indicate that productivity increases with age until age 40 after which it stays roughly constant. Wage growth is faster than productivity growth for young workers but after age 40 both wages and productivity grow approximately at the same rate.

Keywords: piece rates, productivity, aging

JEL Classification: J1, J24, J33

Suggested Citation

Pekkarinen, Tuomas and Uusitalo, Roope, Aging and Productivity: Evidence from Piece Rates (October 20, 2012). IZA Discussion Paper No. 6909, Available at SSRN: https://ssrn.com/abstract=2164638

Tuomas Pekkarinen (Contact Author)

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

VATT Institute for Economic Research ( email )

Roope Uusitalo

Uppsala University - Department of Economics ( email )

Box 513
SE-75120 Uppsala
Sweden

IFAU - Institute for Labour Market Policy Evaluation

Box 513
751 20 Uppsala
Sweden

Government of the Republic of Finland - VATT Institute for Economic Research

Arkadiankatu 7
P.O Box 1279
Helsinki, FIN-00531
Finland

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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