This upper level textbook provides a coherent introduction to the economic implications of individual and population ageing. Placing economic considerations into a wider social sciences context, this is ideal reading not only for advanced undergraduate and masters students in health economics and economics of ageing, but policy makers, professionals and practitioners in gerontology, sociology, health-related sciences, and social care. This volume introduces topics in labour economics, including the economic implications of ageing workforces. It covers pension economics and pension systems with their macroeconomic and distributive effects, and the question of risk. Finally, it describes macroeconomic consequences of ageing populations on aggregate saving, inflation, international trade, and financial markets.
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Yes, you can access Economics and Ageing by José Luis Iparraguirre in PDF and/or ePUB format, as well as other popular books in Business & Business General. We have over one million books available in our catalogue for you to explore.
This chapter presents an overview of some of the most important topics arising from the confluence between labour economics and ageing, and focuses on the labour market participation of older people. It sets out the scope of labour economics with respect to individual ageing and alternative views and definition of ‘older’ workers. The chapter also raises aspects of supply and demand, paid employment, unemployment, job search and scarring effects, voluntary work, and inactivity—including a focus on retirement.
1.1 Scope of Labour Economics with Regard to Ageing
Textbooks define labour economics with various degrees of precision. From the study of ‘how labor markets work’ (Borjas 2013, p. 1) and ‘the study of the markets in which labor services are exchanged for wages’ (Cahuc et al. 2014, p. xxiii) to the study of ‘the organization, functioning, and outcomes of labor markets; the decisions of prospective and present labor market participants; and the public policies relating to the employment and payment of labor resources’ (McConnell et al. 2015, p. 1).1
The definition by McConnell, Brue, and Macpherson touches upon many key aspects of labour economics, but I would like to complement it with the following definition from Ehrenberg and Smith (2012, p. 3): labour economics is the study of
the behavior of employers and employees in response to the general incentives of wages, prices, profits, and nonpecuniary aspects of the employment relationship, such as working conditions.
Ehrenberg and Smith brings non-pecuniary elements to the fore, which grow in importance along workers’ life courses. However, labour is still basically thought of as a transaction in which the worker supplies her time and skills in exchange of money. One of ‘the decisions of prospective and present labour market participants’ is the decision to cease paid employment. Needless to say, this is a decision looming large on the minds of older workers, so it should become part of labour economics in its relationship with ageing.
There is one additional element that the definitions above, as well as much of the academic literature on the economics of labour, leave out, which also grows in importance in later life: volunteering, that is engaging in voluntary work.
Now we have all the main elements needed in a study of labour economics and individual and population ageing: paid employment—including its pecuniary and non-pecuniary aspects—the decision to cease paid work (though not necessarily to cease working), and unpaid employment. Therefore, labour in later life should be not only about paid employment but about what Herzog et al. (1989, p. S130) called ‘productive ageing’: ‘any activity by an older individual who produces goods or services, whether paid or not, or develops the capacity to produce them’. These authors argued that treating paid employment as the only productive activity reflects either expediency or ‘unwillingness or inability to measure more directly the characteristic of interest’ [p. S129] and added that to call paid, but not unpaid, work ‘productive’ is ‘unwarranted’.
This enlarged view incorporates the study of unpaid work within the realm of labour economics. After all, unpaid or not, it is work, isn’t it? Well, yes and no. In an anthropological sense, it is. In a wider economic sense, it is too. However, the narrow official definition of work treats a job a job only if it is remunerated: a home-maker, for example, is officially classified as economically ‘inactive’, even though home-makers are usually occupied in a long list of activities in exchange of which many an economic agent gets a remuneration: budgeting, cleaning and washing, cooking, caring, and so on. Home-makers are officially inactive because they are not paid for looking after their homes. Large numbers of older people are equally engaged in unpaid occupations, providing services not in exchange of a remuneration. To fix the idea, let’s consider the case of older voluntary drivers who take patients to hospitals, dentists, doctors, and so on. These volunteer drivers provide the same patient transport services as paid drivers and are subject to the same entry requirements and regulations. The principal difference is that volunteer drivers do not earn a salary and are only paid an allowance for using their own vehicle. Paid drivers are officially employed; volunteer drivers are officially inactive. Rather than excluding these activities, the study of the economics of labour should be expanded to incorporate the decision to work in either paid or unpaid jobs.
The rationale, then, for expanding the reach of labour economics is based on the economic impact of unpaid activities (which was presented in Volume II, Chap. 6, in connection with caregiving). There is an additional reason for adopting this approach: the meaning of work for older people. Using structured interviews with people aged sixty or over, Knight et al. (2007) reported that respondents saw the following five roles as work: home-maker, volunteer, carer, paid employee, and student.
1.1.1 Alternative Conceptualisations of Work
As we will see below, most economic models of household consumption and production, as well as most models of labour supply include at least the following two variables: consumption and leisure. Both variables are assumed to have a positive association with an individual’s utility or satisfaction: higher levels of consumption and longer leisure time would increase utility, albeit, at a diminishing rate.
Leisure is inversely associated with labour supply and therefore production: of course, a longer leisurely time means a shorter time that can be allocated to labour and other productive activities.2 Higher labour supply means higher income, higher income leads to higher consumption, and higher consumption translates into higher utility. However, higher labour supply means shorter leisure time, which reduces utility. That extra hour in bed feels really good, but the extra money in the pocket is not bad either: leisure and labour pull in opposite directions. So, how much time does each individual allocate to leisure and labour? The short answer is, er, the proverbial economist’s one: it depends. But economics can also provide a longer answer: an economic agent’s allocation of time between labour and leisure depends on her relative preference for one or the other activity, measured by her marginal rate of substitution between labour and leisure. Workaholics have a very large marginal rate of substitution of labour for leisure: the leisure alternative has to be really good for them to give up their precious labour time. In contrast, sloths (the arboreal mammals florivora, I mean) must have very, very low rates of substitution of labour for leisure!
As the opposite to leisure, and therefore considering it as a direct source of dis-utility, on the one hand, but as an indirect source of utility through the consumption made possible by the remuneration it is exchanged for, on the other, is not the only manner in which labour has been approached. It has also been conceptualised as a curse and a torture, and as a source of alienation.
Considering labour as a curse is reminiscent of the Old Testament narrative of the garden of Eden. The association between labour and torture finds its origin in Greco-Roman mythology and is reflected in several European languages. A tripalium was an instrument of torture used in the early Middle Ages. Although contested among linguists and etymologists, this is the root of words such as trabajo, travail, travaglio, trabalho, trebail, and treball, which—respectively—in Spanish, French, Italian, Portuguese, Galician, and Catalan mean labour. In English and the Romance languages, labour has a connotation of toil, pain, and suffering (as in parturition). Labour is, etymologically at least, either sheer torture or a painful activity.
Karl Marx saw labour under capitalism as a source of alienation.3 To merely sketch out the idea, as a more in-depth discussion would deviate us from our main concern, Marx proposed that human beings are meant by nature to identify with their labour, that labour is the essence of being human, and that humankind in general is manifested in the fruit of labour. However, under capitalism, the division of labour and the separation between labour and capital, resulting in the co-modification of the former, have altered this intrinsic relationship between the worker and her labour supply, leading to alienation. In Marx’s words:
…within the capitalist system …all means for the development of production undergo a dialectical inversion so that they become means of domination and exploitation of the producers; they distort the worker into a fragment of man, they degrade him to the level of an appendage of a machine, they destroy the actual content of his labour by turning it into a torment; they alienate …from him the intellectual potentialities of the labour process in the same proportion as science is incorporated in it as an independent power; they deform the conditions under which he works, subject him during the labour process to a despotism the more hateful for its meanness; they transform his life-time into working-time, and drag his wife and child beneath the wheels of the juggernaut of capital. (Marx 1990, p. 799)
Unlike labour, the word ‘work’ has a more prosaic etymological pedigree, coming from the Indo-European root werg, which simply means to do—several words in the English language descend from its Greek derivative, ergon—
, which have a relation to activity: energy, lethargy, synergy, and so on; even the word surgeon shares the root, as physicians who ‘work with their hands’.
Beyond their different etymological origins, work sometimes shares with labour the negative connotations mentioned above. However, work is also simply considered either as...
