Education and ageing: human capital investments and ageing

Increasing life expectancy, falling birth rates, and reforms of pension systems have all contributed to a global ageing of the labor force over the past few decades. At the same time, rapid technological change leads to changing skills demands, implying that workers are increasingly challenged to keep their skills up to date at later ages. This chapter discusses the importance of human capital investments for maintaining older workers’ employability in this dynamic ageing environment. It provides an overview of how production of human capital evolves through the life cycle and which types of human capital investments are available to workers. It discusses the impact of skills obsolescence for human capital investments over the life cycle and examines in more detail the importance of lifelong learning and the returns to human capital investments later in life. We further discuss the mutual relation between human capital investments and retirement behavior. Finally, this chapters formulates a research agenda that stresses the importance of further random control trials to investigate the effectiveness of training policies aimed at older workers. We argue that more research is needed on the specific preferences of older workers with respect to the skills they would like to invest in and on which training modes are most effective in raising the returns to training for older workers. Along these lines we should find answers to the crucial question of how we can enable human capital investments to account for the changing needs and preferences over workers’ lengthening life cycle.