The relationship between employer‐provided training and the retention of older workers: Evidence from Germany

• Published date: 01 December 2017
• Author: Peter B. BERG,Matthew M. PISZCZEK,Christopher J. RUHM,Mary K. HAMMAN
• DOI: http://doi.org/10.1111/ilr.12031
• Date: 01 December 2017

International Labour Review, Vol. 156 (2017), No. 3–4

Copyright © The authors 2017

Journal compilation © International Labour Organization 2017

*

School of Human Resources and Labor Relations, Michigan State University, email: bergp@

msu.edu. ** Department of Economics, University of Wisconsin – La Crosse, email: mhamman@

uwlax.edu. *** Department of Management and Human Resources, University of Wisconsin

Oshkosh, email: piszczem@uwosh.edu. **** Frank Batten School of Leadership and Public

Policy, University of Virginia, email: ruhm@virginia.edu. This study uses the IAB Establishment

Panel (Waves 2002, 2006 and 2 008). Data access was provided on-site at the Research Data Centre

(FDZ) of the German Federal Employment Agency (BA) at the Institute for Employment Research

(IAB) and, subsequently, via remote data access, through project number fdz426. For information

on the IAB Establishment Panel, see Fischer et al. (20 09) and Ellguth, Kohaut and Möller (20 14).

Responsibility for opinions expressed in signed articles rests solely with their authors, and

publication does not constitute an endorsement by the ILO.

The relationship between

employer-provided training

and the retention of older workers:

Evidence from Germany

Peter B. BERG,* Mary K. HAMMAN,** Matthew M. PISZCZEK***

and Christopher J. RUHM****

Abstract. A substantial portion of Germany’s workforce will soon retire, making

it difcult for businesses to meet their human capital needs; training older work-

ers may help to manage this demographic transition. The authors therefore exam-

ine the relationships between employer-provided training programmes, wages and

retirement among older workers. They nd that when establishments offer spe-

cial training programmes targeted at these workers, women – especially low-paid

women – are less likely to retire, possibly because of consequent wage growth.

Their results suggest that such targeted training can indeed play an important role

in retaining low-wage older women and advancing their careers.

All developed economies are experiencing population ageing, driven pri-

marily by increased life expectancy and declining birth rates (Danson,

2007). Population ageing has signicant implications for the labour market and

the age composition of workforces within organizations. Germany is ahead of

most countries in its demographic transition. It is regarded as Europe’s “rst

and biggest test of the problems caused by an ageing and declining popula-

tion” and is predicted to lose 5 million workers due to ageing over the next

15 years (a 12.5 per cent decline), while immigration and young workers en-

tering the labour force are expected to ll only a small portion of this gap

International Labour Review496

(Elliott and Kollewe, 2011, p.1). Germany’s overall population is projected to

shrink by 18.8 per cent by 2060 (Eurostat, 2011), and its working-age popu-

lation (15–64 years old) could fall by 35 per cent (Wanger, Weber and Fuchs,

2013). By the end of the current decade workers over age 50 will constitute

40 per cent of the German labour force (Buss and Kuhlmann, 2013). As the

largest economy in Europe, Germany’s continued economic success is critical

to Europe and the global economy. With an unemployment rate under 6 per

cent, an ageing population and a shrinking labour force, German rms must

confront how they develop and make use of the knowledge, skills and abil-

ities of their older workers.

Population ageing raises concerns about the macroeconomic impact of a

“demographic decit” (Harper, 2014). Ageing not only increases pressure on so-

cial programmes that provide for the elderly, but it may also reduce the product-

ive capacity of the workforce if younger workers are generally more productive

than older workers. Although medical studies provide evidence of age-related

individual physical and cognitive decline (e.g. van Ours, 2009), recent research

indicates that the productivity effects of workforce ageing vary across establish-

ments and that older workforces are not always less productive (Börsch-Supan

and Weiss, 2016; Göbel and Zwick, 2013). Additionally, some employers may

implement effective programmes for enhancing and preserving the productivity

of their ageing workforces (ibid.). Such strategies to maintain and increase pro-

ductivity across the life cycle may be key to managing the demographic decit

both at the establishment level and at the macroeconomic level.

German employers are making use of various human resource practices

to discourage early retirements or extend working lives. For example, the Ger-

man corporation BASF has launched the “Generations@Work” initiative, en-

gaging its employees in life-long training, human resource development, health

management, ergonomics, work–life balance, and exible working hours (Blau,

2011). Agreements negotiated between the chemical industry and the indus-

try trade union include a “demography fund” to support a variety of practices

related to the management of older workers, including training. Yet, there

is limited research on the role that workplace policies and practices play in

encouraging or discouraging longer working lives or about the mechanisms

through which such practices operate (Dietz and Walwei, 2011; Paullin and

Whetzel, 2012; Schlick, Frieling and Wegge, 2013). Training across the life cycle

has strong intuitive appeal but, as we discuss below, existing research offers

mixed ndings with respect to worker willingness to participate and the ef-

cacy of such training.

As establishments and policy-makers confront the reality of ageing work-

forces and persistent technological change, more guidance is needed for the

implementation of training programmes. This article focuses on the relation-

ship between employer-provided training and the retention and wages of older

workers. We focus on retention because longer worklives are an integral part

of most policy approaches to reducing the economic and social challenges

of ageing. If training programmes lead to careers that are both longer and