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The Impact of An Aging Population on Labor Market Relations

The Impact of An Aging Population on Labor Market Relations

The aging US population has led to the decline of the working population relative to the total population. As a result, organizations have had to implement policies that allow employees to extend their working age. However, it is not easy to get people past 60 years back to the workplace without offering substantial incentives. Employers have adopted better private pension plans besides giving older workers direct financial incentives (Boothby et al., 2013). Research data from the US indicates that individuals with private pension plans tend to retire earlier, but the decision depends on the underlying motive. Therefore, giving older employees a better pension offer relative to what they currently have will motivate them to stay at the workplace longer.

Evidence also suggests that older people prefer to work in less intensive workplaces. Therefore, employers are sometimes forced to have special working arrangements for senior employees. One such structure is home working, which is possible due to technological advancement (Samorodov, 1999). Besides, adopting a 1996 ILO convention to protect home working has encouraged organizations to allow older workers to work flexibly once the state adopts the declaration (Samorodov, 1999). The convention called on organizations to prioritize older workers whenever they need to subcontract home working opportunities.

Furthermore, the relationship between age and productivity causes a complex problem. Although labor income continues to rise in the employee’s second phase of active work life, productivity decreases during the period. That means there is a discrepancy in compensation, as younger employees earn little, yet they are the most productive (Serban, 2012). As a result, some organizations tend to avoid employing older people to prevent wage losses. The reduced cognitive skills among older people result from a decreased sense of observation and poor communication.


Boothby, D., Dubois, J., Fougère, M., & Rainville, B. (2003). Labor market implications of an aging population. Industry Canada, Micr-Economic Policy and Analysis.

Samorodov, A. (1999). Ageing and labor markets for older workers. Geneva: Employment and Training Department, International Labour Office.

Serban, A. C. (2012). Aging population and effects on the labor market. Procedia Economics and    Finance1, 356-364.


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