Analysis of the costs of employing older workers indicates that some types of employment costs do vary by age and that overall compensation costs increase with age, largely because of increasing employee benefit costs. There is, however, no statistical evidence that direct salary costs increase by age on an economy-wide basis. The belief that older workers cost more seems generally related to feelings about performance and productivity; however, statistical evidence does not indicate generally poorer performance or productivity by age, and the limited statistical data available refute the basic notion that older workers are less capable. One problem that needs to be addressed when discussing an aging work force is the problem of skill obsolescence; if older workers are to remain cost effective, their skills must be continuously updated through training and education to assure continued productivity. Policymakers must recognize the need for lifelong education, but must take care that legislative and regulatory requirements affecting employment costs for older workers do not place undue cost or administrative problems on employers. Such costs would discourage the employment of older workers. (MN)