An Age Old Employment Myth Takes Its Lumps

An Age Old Employment Myth Takes Its Lumps

One of my favorite conversational gambits with old friends and new is retirement. Questions like, “When do you hope to retire?” and “How will you fill your time after you stop working?” never fail to spur entertaining exchanges.

I’m not shy about revealing my own feelings on the matter. I’ve seen too many living embodiments of the adage, “If you rest, you rust.” I hope I never retire. I want to occupy my time during the post-age-65 years doing essentially what I do now.

I can just see it. The team of doctors ministering to me in the hospital gives me just 24 hours to live. “No, no, you’ve got to extend it!” I bellow through the oxygen mask. “I’ve got to meet three deadlines before the weekend.”

I’ve researched and written enough articles on the topic of encore careers and “finding purpose in retirement” to know many of my contemporaries agree with the wisdom of working and remaining challenged later in life. And that could make for a new paradigm when it comes to Boomers’ old age.

Seemingly forever, people retired at age 65, freeing up positions for fresh-faced young men and women eager to invade the ranks of the employed, toil 40 or 45 years, and then hand off the baton to the next crop of newbies.

But if our plans bear fruit, I and many others of the Boom-Boom generation won’t do that. Decades from now, I for one might find myself employed at age 82, competing for work with a guy or gal born no fewer than 60 years after I was!

You simply didn’t have that phenomenon in previous generations. The fact you do now has led to speculation late-retiring older workers spell career doom for younger folks. The thought is that aging Baby Boomers are squeezing youthful employees out of jobs, in a situation commonly called “crowding out.”

A great premise, but…

Alicia H. Munnell and April Yanyuan Wu of the Center for Retirement Research at Boston College recently tackled this assumption that older and younger workers are battling in a zero-sum game for a fixed number of jobs. In their report “Are Aging Baby Boomers Squeezing Young Workers Out of Jobs, ” they write, “Working longer is often hailed as the best way to increase retirement incomes.

But some suggest more work by older persons reduces the job opportunities for younger persons. This contention, known as the ‘lump of labor’ theory, is widely accepted in many European countries, and has provided an economic rationale for early retirement programs. However, economists in the United States generally reject this theory, arguing that the labor market is dynamic and the economy can adapt to labor force changes.”

I’ll accept that U.S. economists reject the theory. But I get the sense big media and everyday folks still subscribe to it. And that makes Munnell’s and Wu’s findings all the more important.

Examining the baseline results of their research, the authors found that not only isn’t the employment of older people deleterious to employment by younger people, but in fact just the opposite is true. A one percent increase in the older worker employment rate is associated with a decline in youth unemployment of 0.11 percent, an increase in youth employment of 0.21 percent, and an increase in hours worked of 0.13 percent.

But, the authors asked, would “slicing and dicing” the data in different ways generate an entirely different set of conclusions? So they sliced and diced.

They examined older workers’ impact not on younger workers but on “prime age” workers 25 to 54. And they found the same results as above.

They examined the data while controlling for the varying job markets in different states. And they found the same results as above.

They examined the data while looking at gender differences, and the increase in female labor supply over the decades, and they found the same results as above.

They examined the data while examining not employment and unemployment rates, but wages, and they found the same results as above.

They examined the data while looking at the impact of varying levels of education on employment of younger workers. And they found that the relationship didn’t vary based on educational attainment.

The lump sum summation

When all was said and done, the authors found only one place where older workers had a negative impact on younger. That was among females, and only during the years of the Great Recession. Then, employment of older women was linked with declines in the wage rates of prime-aged women, and increases in young female unemployment.

Overall, they noted, “evidence suggests that greater employment of older persons leads to better outcomes for the young — reduced unemployment, increased employment, and a higher wage. The patterns are consistent for both men and women, [and] for groups with different levels of education.”

Simply put, they concluded, “the lump-of-labor theory needs to be put to rest.”

My take on this is if you’e an older worker who wants to work longer, don’t feel guilty about doing so. And if you’re a younger worker upset about older people working longer, despite what the research shows?

Like it or lump it.

7 Responses to “An Age Old Employment Myth Takes Its Lumps”

  1. Anonymous

    When older workers retire, they continue to consume resources, but they stop producing them. This nets out to a drain on the economy. Hence, I can understand why it hurts employment opportunities for younger workers.

  2. Anonymous

    Agreed with BG and Simply Rich Life.

    I think this study actually demonstrates the opposite, that recessions hurt younger workers more than older workers due to the older workers crowding out the younger workers and out competing them due to their experience.

  3. Anonymous

    As BG says, the effect could likely be due to certain areas having less available labor with employers willing to hire anyone. The fact that there is only a tiny increase in employment for young people when there is a labor shortage might be a sign that they are being pushed out.

    Then again, people who run out of money in retirement can’t spend money and create jobs. It’s always good to keep the economy flowing rather than letting it stagnate.

  4. Anonymous

    The theory that aging boomers are keeping young people out of work, is a myth. Some boomers will retire early and some will retire later. The economy and people’s circumstances will always adjust with one another. Munnell and Wu have shown that young people will not get ‘crowded out’. A good statistical study. Now let’s all get back to work. 🙂

  5. Anonymous

    Correlation does not imply causation!

    I guess if we follow this “study” to it’s conclusion, once the baby-boomers finally start retiring in earnest: we are all going to be unemployed. Hah!

    Instead of more employed seniors somehow “causing” more employed younger folks, isn’t is much more likely that recessions cause declines in employment for both seniors and young people — just as a booming economy causes employment to increase for both seniors and young people?

    “And if you’re a younger worker upset about older people working longer, despite what the research shows? Like it or lump it.”

    Peer-reviews or the “study” is just trash.

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