Younger Workers Key to Boosting Corporate Productivity
New research shows that younger workers significantly increase the innovation produced by their employer companies.
The findings are contained in a recently published paper in The Review of Financial Studies titled, “Labor Force Demographics and Corporate Innovation.” The article was co-written by Ambrus Kecskés, Associate Professor of Finance at Schulich, together with François Derrien, Professor of Finance at HEC Paris, and Phuong-Anh Nguyen, Assistant Professor of Finance at York University’s School of Administrative Studies.
The researchers argue that because of their creativity, risk tolerance, horizons, and interactivity, younger workers are instrumental in the production of innovation. Using the current labour force in each local labour market in the United States, the researchers analyzed firm, inventor, and city levels. The researchers found that both the output and market value of innovations are higher for firms in younger labour markets, as established causally by exploiting historical birth records data.
The findings indicate a number of policy recommendations for the demographic challenges confronting the world today. Not only do younger labour forces produce more innovation, but they also create more wealth, according to the researchers. This suggests that there are potential net benefits to mutually reinforcing public policies that can counter the effects of an aging labour force, including improving education and training, encouraging immigration of young and skilled workers, and incentivizing domestic population growth.
“It’s very counterproductive that the Canadian government is intent on reducing international student permits,” says Kecskés. “Politicians proclaim the need in Canada for immigrants across the board to fill labour shortages due to the country’s aging population. At the same time, they want to restrict the number of young and skilled immigrants, who would raise Canadian innovation and productivity — in a country famous for suffering decades of languid investment and innovation. This would be quite an own goal.”