Tuesday, April 25, 2006

Ericsson Offers Redundancy To Workers In The 35 to 50 Age Group

by Edward Hugh

Well, I think this certainly is news. And it fits in with the findings of ongoing research from 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).

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.

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.


CV said...


It shows something very important and that is the inertia in society for recognizing the demographic development. It is also stunning to see the strategic choices of some of the cooperations in Denmark on this matter. I.e. a discourse which laments the shortage of qualified labour and the seeming unwillingness to hire a senoir worker.

Selfishly I should be happy, though I am not :), since companies seemingly tend to prefer fresh candidates from the universities ... this means employment for me. But I cannot but think that the notion of old workers making way for young workers is very out of pace with the challenges companies face in the future when it comes to attracting the best brains.

Celal Birader said...

Remember "Logan's Run" ?

But, in the movie they didn't wait till you were 35; they just snuffed you out when you hit 30.


Scott said...

Interesting story: in the USA such an action by management would bring about a flurry of age discrimination lawsuits. Also, at least in the USA the key age group is considered to be those 18 to 49 years old.

It seems rather a broad stroke; perhaps the company would be better served by interviewing its employees in the age bracket in question and understanding the values and attitudes of those employees. Then making offers of "redundancy" to those that management thinks won't be able to contribute.