Workforce Composition and the Risk of Labor Market Exit Among Older Workers in Finnish Companies

Abstract

Abstract This article investigates how a firm’s workforce characteristics affect an individual’s timing of exit from the labor market. It analyzes the relations between the age, skill, and wage structures of companies and the risk of labor market exit of Finnish older workers by using the detailed longitudinal register-based Finnish Linked Employer–Employee Data. The study follows the Finnish working population born between 1942 and 1950 (N = 216,713). Multilevel discrete-time survival analysis with individuals nested in firms is applied to estimate the risk of permanent exit from work between the ages of 53 and 68. The results show that these risks differ between firms: greater diversity in age and education levels among the workforce as well as seniority-based wage systems within a firm decrease the propensity of early exit, while being employed at a firm with an older staff increases the risk of exit. The findings from interactions between individual- and firm-level characteristics further illustrate that one’s individual characteristics matter in relation to the characteristics of the overall firm’s workforce. Being dissimilar from one’s coworkers, especially in terms of skills and education, can reduce the risk of early exit.