Older university professors earn more than younger ones - this paper has Canadian evidence and references.
Studies of scientists and of Norwegian academics have found that research productivity begins to fall at some point, but the onset and rate of decline varies across disciplines. One more recent study found that age and publication productivity were unrelated. Studies (here and here) that track professors' student evaluations over time have found that professors become neither better nor worse teachers as they age. My reading of the research: productivity might decline after middle age or it might stay constant, but it certainly does not increase.
Putting these two observations together, the relationship between pay and productivity over time looks roughly like this:
If pay increases but productivity is stable or decreasing, towards the end of an academic's career her pay will exceed her productivity. This is not a problem as long as it is fully anticipated by both parties.
Firms might structure employment contracts so that pay increases faster than productivity for any number of reasons. For example, suppose a firm makes considerable investments in its employees, so it does not want to lose them. It can induce workers to stay by deferring their compensation, paying new workers salaries below their value to the firm, and more senior workers salaries above their productivity. Workers stay with the firm in order to receive that late-career pay-off. Or firms might pay more senior workers more just because annual pay increases make people feel motivated and happy.
Such a pay structure can be profitable as long as the pay structure is similar to the one shown in the diagram above, where the high costs of paying workers between 45 and 65 are counter-balanced by the low cost of paying workers between 25 and 45. But if the terms of the employment arrangement were changed so that workers stayed on until 75, the firm's pay structure would no longer be profitable: the costs of paying experienced workers more would exceed the gains from underpaying junior workers.
Universities in BC, Ontario, Saskatchewan, Nova Scotia and Newfoundland are experiencing just this kind of change.
Until fairly recently, university professors' contracts in these provinces were negotiated under the assumption that all professors would retire at age 65. That standard retirement age is no longer in force. Professors may continue to work as long as they choose - or until they become incapable of performing their duties.
A recent paper (ungated here) by Chris Worswick and Casey Warman compared provinces with and without a standard retirement age. They found that, without a standard retirement age, the typical professor retired at about age 70, but a small minority continued to work for much longer.
Worswick and Warman's results imply that the period during which a typical professor is receiving a salary in excess of his or her productivity has increased by about five years. That money has to come from somewhere: lower salaries or greater productivity expectations for academics earlier in their careers, lower salaries for staff elsewhere in the academy, the substitution of lower-cost contract instructors for tenured or tenure-track faculty members, higher tuition, greater government funding.
It is not wrong to keep working. One "retired" colleague of mine continues to work for the university chairing PhD examinations. He enjoys the work and does it superbly; no one else wants to do it. He is paid a sum of money that compensates him for his time, and reflects the contribution that he makes to the university. The arrangement pleases everyone.
But to collect a six-figure salary, when others could do the work as well, have greater financial need, and would be willing to do the job for less....?