Too Old To Work For Ericsson?

Well if you’re over 35 you may be. That’s the implication of today’s decision to offer redundancy to workers in the 35 – 50 age group:

Ericsson, the telecoms equipment maker, on Monday offered a voluntary redundancy package to up to 1,000 of its Sweden-based employees between the ages of 35 and 50. The unprecedented move is designed to make way for younger workers.

This fits in with the findings of ongoing research by Italian economist Francesco Daveri. See especially working paper 309: “Age, technology and labour costs”, which examines the case of Finland and especially Nokia (available on this page, abstract pasted at the bottom of this post).

Details below the fold:

The world’s biggest supplier of mobile phone networks, which more than halved its headcount during a dramatic restructuring programme in 2000-02, said the measure was necessary to ensure the competitiveness of the company in the next decade.

“The purpose of this programme is to correct an age structure that is unbalanced,” said Marita Hellberg, global head of human resources, told the Financial Times. “We would like to make sure we employ more young people in order not to miss a generation in 10 years’ time,” Ms Hellberg said.

According to Ms Hellberg, Ericsson’s age structure had become too heavily biased to the 35-50 age group in the aftermath of its restructuring programme.

Employees aged between 35 and 50 with a minimum of six years’ service are eligible for the voluntary redundancy package that comprises 12-18 months’ salary, a SKr50,000 ($6,600) pay-out and the chance to participate in a career change programme.

Now here’s the abstract of the Francesco Daveri and Mika Maliranta, Age, Technology and Labour Costs research:

Is the process of workforce aging a burden or a blessing for the firm? Our paper seeks to answer this question by providing evidence on the age-productivity and age-earnings profiles for a sample of plants in three manufacturing industries (“forest”, “industrial machinery” and “electronics”) in Finland. Our main result is that exposure to rapid technological and managerial changes does make a difference for plant productivity, less so for wages. In electronics, the Finnish industry undergoing a major technological and managerial shock in the 1990s, the response of productivity to age-related variables is first sizably positive and then becomes sizably negative as one looks at plants with higher average seniority and experience. This declining part of the curve is not there either for the forest industry or for industrial machinery. It is not there either for wages in electronics. These conclusions survive when a host of other plausible productivity determinants (notably, education and plant vintage) are included in the analysis. We conclude that workforce aging may be a burden for firms in high-tech industries and less so in
other industries.

There is one logical and inescapable conclusion from all this, if “workforce aging may be a burden for firms in high-tech industries and less so in other industries” then this implies a move down, not up, the value chain for those societies with rapid ageing.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".