Talent Management Column

Older Workers and the Job Market

More older individuals are staying in the job market longer -- or trying to get jobs, but they often face discrimination for a variety of stereotypical reasons. If hiring managers and HR leaders tended to think of such workers as "experienced," instead of "old," they might find talented workers who could positively impact their organizations' success.

Monday, October 11, 2010
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The long-term aging of the workforce is creating a new and important challenge for management, one that has been exacerbated by this Great Recession.

Older workers are deciding that it makes sense to stay in the workforce longer -- not only because they are living longer, but now also because of the uncertainty associated with their retirement income. Retirement investments and 401(k)s have taken a hit, but arguably more important is the sense that it may happen again and that a prudent older individual needs to keep at least a foot in the labor force to hedge their financial bets.

We can see evidence for this in the most recent government data.

The percentage of individuals over age 65 who are in the labor force jumped about 40 percent from 1998 to 2008. Since the Great Recession began, the number of individuals over age 55 and over 65 who are in the labor force has risen even while it has declined for the population as a whole.

This reflects not only the fact that there are more older individuals in the population, but also that a greater percentage are working-- or trying to work. There actually seem to be fewer "discouraged workers" who give up and withdraw from the labor force in this older population than in the workforce as a whole.

This takes us to a new problem -- at least new in the past couple of decades -- of older workers coming back into the labor market to find new jobs. They are hanging in there trying to get jobs, but they have a harder time doing so than their younger counterparts. It won't surprise anyone who is older to find that age discrimination is a big problem and that formal complaints about it have risen in the recession.

What might be surprising is to hear that the evidence suggests that it is even more prevalent than gender and minority discrimination.

Consider a study I outline in my new book with William Novelli, Managing the Older Worker. An experiment sent two otherwise identical applicants -- except for age -- to apply for entry-level sales and management jobs. The older applicant got less favorable responses 41 percent of the time, and in three-quarters of the cases, the older candidate was rejected before they could even present their qualifications.

Where both candidates were offered positions, the older candidate was offered lower-value health insurance in one-third of the cases.

Controlling for other factors, the older candidate faced discrimination one-third of the time for sales positions but 100 percent of the time for management positions.

The study -- "No Foot in the Door: An Experimental Study of Employment Discrimination Against Older Workers," which originally appeared in the Journal of Aging and Social Policy -- also explored what happened when the paired applicants applied through employment agencies. Here, the rate of apparent discrimination was much worse -- more than double what it was when dealing with the employers directly.

How old does one have to be for age discrimination to begin? A survey by the New York-based Association of Executive Search Consultants of senior executives in large companies -- who are themselves among the oldest employees in their organizations -- finds more than 60 percent reporting such bias is apparent between age 50 and 55:

Age at Which Age Discrimination Becomes Apparent

Age 40: 3.4 percent

Age 45: 16 percent

Age 50: 36.5 percent

Age 55: 24.6 percent

Age 60: 10 percent

Age 65: 2 percent

There is no age discrimination: 7.5 percent

Age discrimination is obviously bad for individuals and for society. But it's also a really bad thing for employers because it turns out that, on almost every dimension of job performance, older workers do better than their younger counterparts.

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This may sound surprising, but if we substitute the word "experience," which has positive connotations, for the word "age," it starts to make sense: Wouldn't you want the most experienced doctor or the most experienced mechanic working for you?

Interpersonal abilities as well as job-related knowledge grow as we get older. Older workers have the ability to step right in and start contributing, to "hit the ground running," as employers say they need employees to do.

It is certainly true that age-related infirmities can cause performance problems, but it is important to remember that not all older individuals have them. (The fact that we are living longer and healthier means that individuals with such problems are actually becoming a smaller proportion of the population.)

About the only job-related ability that worsens with age is learning novel tasks. But few employers today hire anyone and then expect to train them in a new field. And updating skills is not the same as learning entirely new skills.

Nor is it true that older workers cost more. More experienced workers do get paid more because the market rewards the competence that comes with it. But there is no premium for age: Other things being equal, older workers don't get paid more.

Nor do their benefits necessarily cost more. While they use more healthcare themselves, they have fewer dependents -- no pregnancies and no little kids, who use a lot of healthcare dollars.

It's not performance and it's not cost. So that takes us back to age discrimination. Everyone has a stake in doing something about this because we are all getting older, and as we live longer, we'll need to work longer as well. And we don't want to be discriminated against.

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School.

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