Older Workers, Training and Innovation: A Comparative Study of Germany and Great Britain

The demographic development in many industrialized countries gives rise to the question as to how an aging workforce affects firm performance and how firms can adjust to demographic change. We address this question by examining the relationship between the share of older workers and the innovativeness of firms in Germany and Britain – Germany as the prototype of a coordinated and Britain as the prototype of a liberal market economy. Considering product, process and marketing innovations, our empirical analysis shows that a negative influence of older workers on innovativeness is more pronounced in Germany than in Britain. For both countries, we find that employer provided training mitigates this negative influence. In Britain, training partially even tends to turn an older workforce into an opportunity for innovativeness. However, the type of training that helps firms adjust to an older workforce differs sharply between the two countries. In Britain, off-the-job training plays a crucial role while on-the-job training is the crucial adjustment mechanism in Germany. Our findings conform to theoretical considerations suggesting that the degree to which firms can adjust to an ageing workforce and the way in which they can adjust depend on the institutional framework of the respective country.