Do older workers squeeze out younger employees?

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(MoneyWatch) Despite popular belief and media reports, there's no evidence that older workers who stay on the job longer squeeze out opportunities for younger employees. That's the conclusion of a comprehensive analysis and paper prepared by the Center for Retirement Research (CRR) at Boston College.

While there might be some instances of older employees crowding out younger workers within some companies, certain locales, or in localized industries, the report found there's no support for the notion that older workers inhibit opportunities for younger workers across the work force at large.

The CRR report examined employment and unemployment rates, wages, and hours worked in all 50 states over time (1977-2011) for three different age groups: 20 - 24 (the "young"), 25 - 54 (the "prime-aged"), and 55 - 64 (the "old"). There was a wide variation in all measures across all states and all three age groups. If older workers were crowding out younger workers, then you'd expect that states with increased rates of employment and/or wages among older workers would also lead to increases in rates of unemployment and/or wages among younger workers, but that just wasn't the case.

The report also looked at levels of employment both before and during the Great Recession and found no support for the notion that the recession changed the relationship between opportunities for younger and older workers. Two factors that were affected by the Great Recession were employment/unemployment rates and wages among all workers. The state of the economy and the health of specific industries impacted both factors, but there still was no evidence that employment among older workers impacted opportunities for younger workers.

The research paper showed that employment among younger workers was influenced by their education and skill levels, and by whether these workers were employed in the service or manufacturing industries. There was also evidence that younger workers may have needed to migrate to job opportunities in new locations or industries, particularly as the Great Recession closed out many jobs in the manufacturing sector.

If older workers who stay on the job longer have any effect at all on their younger cohorts, the report found it is actually a positive one. There's some evidence that older members of the workforce create more, not fewer, opportunities for younger workers. Employment of young workers and older workers could be positively related because in states with strong economies both groups are doing well, while in states with weak economies both groups are doing poorly.

What's the reason for these conclusions? "If older citizens stay on the job longer, they are workers as well as consumers. They demand goods and services, which creates more job opportunities for the young and expand the overall the overall economic pie," explains Alicia Munnell, director of the CRR who recently co-presented this research paper at a conference at Stanford that addressed the issue of an older workforce.

"The U.S. labor market isn't a closed box with a fixed number of jobs, where one younger worker directly substitutes for one older worker," she said. Instead, the overall labor market is flexible and dynamic, and can absorb workers of all ages who have the skills that are needed by our economy.

The CRR paper included a review of considerable research conducted over the years by different researchers that was consistent with the conclusions of their paper.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.

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