No evidence that older workers are crowding out younger ones

Posted by: Peter Coy on July 08

Guest blog from Economics Editor Peter Coy
Are older workers crowding out younger ones in this recession? It’s tempting to say so, considering that employment has risen 1% among people 55 while it has fallen 5% among people 20 to 54 (see chart). Andrew Sum and colleagues at Northeastern University wrote a paper last December highlighting the discrepancy. It was called “Out With the Young and In With the Old.”
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The poster child for the worker who just won’t quit—though here, child is definitely not the right word—is Emma Shulman, a consulting gerontologist at NYU Medical Center. She is 96 years old and has survived two husbands, more than 70 years of cigarette smoking, and a Scotch habit (“I was a Scotch maniac”), as described in a profile yesterday in The New York Times.

I was gratified to read about Shulman’s continued ventures in the working world because I interviewed her for a 2005 cover story in BusinessWeek called “Old. Smart. Productive.: Surprise! The graying of the workforce is better news than you think.” (That’s Shulman in the middle of our cover.)
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The idea that older workers displace younger ones assumes that there’s a fixed amount of work to be done. That’s known as the lump-of-labor fallacy—and it’s at play in the anti-immigration camp as well. By and large, economies don’t work that way. Workers earn incomes and spend the money and the recipients of the money hire more people and off we go. Growth.

Economists Jonathan Gruber of MIT and Kevin Milligan of the University of British Columbia looked at this question in a National Bureau of Economic Research working paper last year, “Do Elderly Workers Substitute for Younger Workers in the U.S.?” They conceded that their conclusion was “relatively weak” but said, “We find no consistent evidence of an impact of the employment of the elderly on the young or prime-aged in our sample.”


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Reader Comments

Sandwichman

July 8, 2009 10:57 PM

"...assumes that there’s a fixed amount of work to be done. That’s known as the lump-of-labor fallacy..."

Six and a half million jobs disappeared between December 2007 and June 2009. That's not a "fixed amount of work to be done." That's a DIMINISHING amount! By and large... economies don't always work the way economists claim they do. And the lump-of-labor is a quaint anecdote with no authoritative status in economics. Just because the textbooks repeated the claim ad nauseum, doesn't mean any actual economist ever demonstrated a fallacy!


cm

July 8, 2009 11:58 PM

That may be largely a demographic effect. The leading edge of the baby boomers has probably entered the 55+ age. The "hump" of the boomers is currently about 50.

In many run of the mill occupations, the age of the workers is not very material. The obsession with youth and the resulting age discrimination is probably strongest in the fields that have a strong concept of motivation by "career growth" and escalating pay scales, or which are about looks or raw physical endurance. Many non "professional" lines of work don't particularly have that.

It seems to me that in many workplaces people who perform a job adequately typically keep it, as long as the employer has no compelling reason to replace them with somebody younger, which has risks and costs of its own. More likely than not, the next guy will do the job as adequately, but not better, esp. when the business processes are as dumbed down and lacking in empowerment as they often are.

Rgm

July 9, 2009 10:28 AM

... as long as you don't publish one entitled "No evidence that temporary foreign workers are crowding out native ones in IT"... because that would be pure horsesh#&

John Booke

July 9, 2009 10:29 AM

"Baby boomers" have increased the Social Security retirement payroll by over 750,000 since January. A huge spike that will plateau at a higher level over the next twenty years. That should leave plenty of room for new workers.

LAO

July 9, 2009 10:41 AM

If these findings are valid, then it is an easy leap to the conclusion that neither are the young nor prime aged displacing the elderly. It's not difficult, though, to find members of any demographic who have the impression that age is an unmerited excuse for something that irks them. Squelching such notions is far more admirable than whipping them into a frenzy, as long as there is generally no basis in reality.

I agree with the commenter above, and a few prescient others, who sense that there is simply not enough work for all who need it. The throw-away society was a valiant effort to thwart the problem, probably invented by motivated marketers rather than by economists, but it necessarily has a limit and would be disastrous if fully adopted by the rest of the world.

I'm anxiously awaiting the social genius who will twist our perceptions of the good life in a way that enables most everyone to extract a sufficient piece of it. Such visionaries are no doubt among us, but the salesmanship has so far proved inadequate. Economists might do better to get back to the understanding of their discipline as a social "science" if they care to contribute real value to humanity, though I imagine that funding might be a major obstacle.

Squeezebox

July 9, 2009 10:56 AM

It's all about your skill set. If you find your job has become obsolete (like blueprinters for example), you can't find replacement work in your field and you are forced to compete in the unskilled labor market. Young people have the advantage in the unskilled market, especially since they have more computer literacy. OTOH if you have a skill that's in demand, like accounting, you won't be displaced.

Sandwichman

July 9, 2009 12:47 PM

Keith G

July 9, 2009 02:34 PM

Sandwichman, please provide some evidence that YOU know what your talking about.

I'm sure the guest editor would be less offended if you could offer some substantive basis for your judgement.

cm

July 9, 2009 08:49 PM

Squeezebox: There are also countervailing trends. Over at least the past few decades, the image of "mundane" labor has been thoroughly trashed, and almost transformed from conferring modest honor and stature to being considered a loser. Even in well compensated professional jobs I see a distinct phenomenon of much everybody striving to get into management and middleman positions, and being unhappy to be "relegated" to doing actual productive work (the exception are job market entrants who still expect to prove themselves, and for whom subject matter work still has novelty value for a few years). Maybe I'm seeing only particularly bad environments.

I'm under no illusion that earlier generations have been eager to become commodity jobbers, but at least there was no open and public (self-?)labeling as losers. Starting with Gen X, and perhaps even the late boomers, people grew up in a different environment, with a different idea of worthwhile careers. More of the older people may be "old school" in that regard, which may be considered an advantage in some circles. Disillusionment or having realistic expectations may make "motivating" more difficult where constant motivation is considered important, but on the flip side you can expect more stability and less politicking from a workforce without "growth" ambitions. Of course, nobody will probably want to admit as much.

Sandwichman

July 9, 2009 08:51 PM

Keith G.

Thanks for asking. My previous comment linked to my blog entry, which concludes with a link to my September 2007 article in the Review of Social Economy, Why Economists Dislike a Lump of Labor. But here's an abstract of the article to save following all those links...

"The lump-of-labor fallacy has been called one of the "best known fallacies in economics." It is widely cited in disparagement of policies for reducing the standard hours of work, yet the authenticity of the fallacy claim is questionable, and explanations of it are inconsistent and contradictory. This article discusses recent occurrences of the fallacy claim and investigates anomalies in the claim and its history. S.J. Chapman's coherent and formerly highly regarded theory of the hours of labor is reviewed, and it is shown how that theory could lend credence to the job-creating potentiality of shorter working time policies. It concludes that substituting a dubious fallacy claim for an authentic economic theory may have obstructed fruitful dialogue about working time and the appropriate policies for regulating it."

John G. Lyng

July 11, 2009 08:59 AM

What you are probably seeing here is retired boomers who were forced into low-paying service jobs when their retirement plans tanked during the financial melt-down.

riverguy

July 11, 2009 11:11 AM

Things change. In `my' day, you looked for a `good' job; finding one, you kept it. 20, 30 40 years or more. Very rarely does that occur anymore.

libertyville

July 11, 2009 11:23 AM

What these numbers do not show are the 55+ employees that were shown the door. Some were able to early retire though involuntarily. Others are now at Home Depot, Lowes, etc in far lesser jobs to keep benefits until they can retire.

pyrric

July 11, 2009 02:36 PM

Cm comments of hump of baby boomers age is at 50 is off the make baby boomers started at 1948 to 1964 give or take a little. 56 would be the hump and 61 would be the edge.
I am 50 and the first year out of high school was 1977 there were no jobs to be found at that time either. We stood in line then with 10,000 people for 5 jobs at Caterpillar. There was a recession then and I thought as they do now the leading edge of baby boomers have taken all the jobs.I still believe that to this day. Most of my classmates went into business for themselves.
With that all in hand the facts are if the baby boomers leave their jobs the employers of today will not replace the younger generation with the same jobs they will use other companies to pay lower wages and no benefits to replace the retirees.

cm

July 11, 2009 04:22 PM

Pyrric: 1948 + 55 = 2003, 1956 + 50 = 2006, following your characterization. What I said is the *leading* edge (1948+) has entered 55+, and the hump is about 50 (53 according to you). Am I missing something?

On the point of "the employers of today (...) will use other companies", somebody has to do the (domestic) hiring finally no matter how many outsourcing layers - for domestic jobs at least. The claim of the article was about "jobs" not "wages/benefits" (where sadly you seem to be right).

cm

July 12, 2009 04:33 AM

Pyrric: Perhaps by '56' and '61' you meant ages, and I mistook them for years. But then you would be suggesting the peak (hump) of the baby boom would be 1953 (?), which I think is far too early, it's more around the year 1960, starting in the later 1950's.

Anyway, none of this probably takes away much from the boomers having entered their 50's, and having started to enter the 55+ age bracket mentioned in the post.

Ricky

July 12, 2009 10:01 AM

My wife and I are both retired from the federal government. My wife retired at age 48 with a $40,000 per year pension and I retired at age 52 with a $69,000 per year pension. Both of our pensions increase annually based on the cost of living. We also have excellent medical insurance. These early retirement options are good for us and they make room for future workers!!

Gislii

July 12, 2009 08:31 PM

This analysis has many flaws. Ageism is actively dumping older workers regardless of their desire to retire or not. Asset collapse has undermined the viability of retirement. Jobs for young workers have been off-shored and replaced by low cost immigrant labor. Evidence from retirees on guaranteed amount pensions are atypical and unrepresentative of broader trends.

Thank you for your interest. This blog is no longer active.

 

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