A Potential Dividend from Workforce Ageing in Australia

Abstract

"This study explores by simulation analysis the extent of a potential dividend from workforce ageing in Australia. The analysis suggests that the optimum workforce is older than the actual workforce today. Hence, workforce ageing implies that the actual age distribution of the workforce can be expected to shift closer to the optimum age distribution, generating a dividend in terms of aggregate labour productivity. Simulations suggest that the dividend is likely to be non-trivial in magnitude, although the size of the effect depends very much on the values of elasticities of substitution about which little is known. Nevertheless, plausible scenarios can be constructed in which the dividend is sufficient to offset significantly the costs of projected declines in the worker to population ratio."