Purpose: This paper examines employers’ perceptions of changes of the labour cost-productivity gap due to the ageing of the workforce, the effects of tenure wages and employment protect ion on the perceived gap and whether a perceived labour cost-productivity gap affects employers’ recruitment and retention behaviour towards older workers.
Methodology: We analyze surveys administered to employers in Denmark, France, Germany, Italy, the Netherlands, Poland and Sweden.
Findings: Approximately half of the employers associate the ageing of the personnel staff with a growing gap between labour costs and productivity. Both the presence of tenure wages and employment protection rules increase the probability that employers perceive a widening labour cost–productivity gap due to the ageing of their workforce. A counterfactual shows that even when employment protection and tenure wage systems are abolished 40 percent of the employers expect a net cost increase. The expected labour cost-productivity gap negatively affects both recruitment and retention of older workers.
Originality: The wage-productivity gap is examined by the perceptions of employers using an international comparative survey.
Keywords: older workers;labour costs;labour productivity;ageing;employers;tenure; seniority wages;retirement