Editor’s Note: For 31 years now, Paul Solman’s reports on the NewsHour have aimed to make sense of economic news and research for a general audience. Since 2007, our Making Sen$e page has vowed to do the same, turning to leading academics and thinkers in the fields of business and economics to help explain what’s interesting and relevant about their work. That includes reports and interviews with economists affiliated with the National Bureau of Economic Research.
Each month, the NBER Digest summarizes several recent NBER working papers. These papers have not been peer-reviewed, but are circulated by their authors for comment and discussion. With the NBER’s blessing, Making Sen$e is pleased to feature these summaries regularly on our page.
The following summary was written by the NBER and doesn’t necessarily reflect the views of Making Sen$e.
The combination of declining birth rates and increasing longevity in developed countries means labor forces are aging and, in some nations, shrinking. These patterns are particularly evident in Germany, where the population is expected to decline by 18.8 percent over the next 15 years. The labor force will age and may contract by as much as 35 percent. German firms have responded to these demographic changes by instituting targeted training programs intended to induce workers to stay on the job beyond traditional retirement age.
In “The Relationship between Establishment Training and the Retention of Older Workers: Evidence from Germany,” Peter B. Berg, Mary K. Hamman, Matthew M. Piszczek and Christopher J. Ruhm discover that when employers offer training programs targeted at older workers, women — especially low-wage women — are more likely than men to continue working beyond traditional retirement age.
The researchers, who analyze data from the Linked Employer-Employee Dataset of Germany’s Institute for Employment Research, cannot definitely explain this gender disparity. They suspect, however, that lifetime earning patterns play a key role. Men nearing traditional retirement age tend to have longer histories of uninterrupted employment than women and higher lifetime earnings as well as higher average wages. Men may be near the top of relevant pay scales, so the promise of slightly higher wages for additional years of employment may be less attractive to them than the promise of substantially higher wages for such years are to women.
Because many women interrupted their working careers to raise families, their potential wage gains associated with targeted retraining are often much larger than the gains for men. Because of their often-interrupted work histories, women tend to qualify for smaller pensions than men, and more generally, women are far more likely to be financially insecure. For many women, training programs focus on getting them up to speed regarding developments on the job that occurred while they were out of the labor force. The study strongly suggests that offering targeted training may both improve women’s earnings and encourage longer working lives.
— Matt Nesvisky, National Bureau of Economic Research