The Legal Intelligencer - Too-Short Shelf Life: Consequences of Keeping Older Employees Out of the Workforce
Age discrimination is insidious in the workplace and violates the federal Age Discrimination in Employment Act (ADEA). State analogues in most jurisdictions also forbid employers from discriminating against individuals who are age 40 or older with respect to hiring, promotion, wages, other terms and conditions of employment and termination of employment. Numerous litigated cases have alleged that older employees have been pushed out of the workplace and replaced by younger, less qualified workers. Many employers act as if older workers either cannot learn new things and navigate improvements in technology or simply are not interested in doing so. Other discriminatory situations include refusing to hire individuals because they are not "recent college graduates," or "not a good fit," or another code word for "too old." In addition, although arguably not covered by the ADEA, many law firm partnership agreements contain mandatory retirement provisions for partners who reach a stated age. In one recent situation, an older partner, who was forced to retire, decided to form his own firm on the date of his mandatory retirement to continue providing the services he had been performing.
Age discrimination is illegal, and it is also bad for business. According to a recent study by AARP, the economic impact of age discrimination costs billions of dollars on an annual basis€”a potential $850 billion for 2018 alone. As the study explains:
- In 2018, the 50-plus population contributed 40% of U.S. Gross Domestic Product (GDP)€”an outsized impact for a group that comprises just 35% of the population €”and supported 88.6 million jobs and $5.7 trillion in wages and salaries.-
- Reducing involuntary retirement, underemployment and unemployment duration among the 50-plus population could have driven an average increase of 4.1% in GDP in 2018.
- The labor force of people age 50-plus has grown four times faster than the average. The number of workers age 50-plus has increased by 80% over the past 20 years, more than four times faster than overall workforce growth. The number of workers age 65-plus has nearly tripled in the same period.
- People are increasingly interested in working longer. Among those age 65-plus who are currently employed, over 40% intend to work for at least five more years.
The $850 billion€”what would have been an increase in GDP of more than 4%€”was lost because workers over age 50 who wished to remain in or re-enter the labor force, switch jobs or be promoted within their existing company were not given that opportunity. While all industries were impacted, the industries which were hardest hit in the analysis were the "higher-productivity sectors," including finance, trade, and professional services, which "rely on the contributions of a highly engaged labor force."
The three components of the analysis were: involuntary retirement, underemployment, and unemployment duration. The study reported that involuntary retirement contributed more than half€”57%€”of the loss. Underemployment accounted for 27% of the loss; underemployment includes involuntary part-time labor and the loss of pay increases due to the inability to change jobs. Unemployment duration€”a longer period of unemployment for older workers to secure jobs as compared to their younger counterparts€”accounted for the remainder (15%). The study also reported that a disproportionate share of age discrimination's total cost falls on women€”regardless of which of the three sources was the cause of the loss.
Age discrimination negatively affects consumer spending through lost increases in jobs and wages, which translates into less consumer spending in areas like healthcare and travel, and leisure. The AARP Study refers to research by the Federal Reserve Bank of San Francisco, which showed that "older job applicants across the board get fewer call-backs than their younger counterparts with comparable resumes, which can result in extended periods of unemployment among the 50-plus." Not surprisingly, 75% of those aged 50 and older believe that their age is a disadvantage when looking for a job.
Failure to maintain older workers eliminates a component of diversity€”thereby eliminating the business benefit of a diverse workforce. The AARP Study notes further research by Boston Consulting Group, which found that "innovation revenue was 19 percentage points higher in companies with more diversity" on management teams. Apart from the business benefit is the benefit to the workplace brought by age-diverse workforces. Studies have shown that younger employees enjoy working with older colleagues. As was the situation when my father was working as a senior attorney, less experienced attorneys, most often younger lawyers, can learn new strategies and skills from those who have honed their craft through time. And, the senior attorneys generally enjoy sharing the lessons they have learned with less experienced lawyers. This dialogue benefits the lawyers, but also their clients, who receive an improved work product. The line of colleagues outside the door to my father's office seeking his consultation supports this "win-win" approach.
Of course, these benefits adhere in contexts other than professional service firms. Particularly as the study noted, "consumers benefit when diverse workforces develop products and services that are reflective of the needs, desires, and challenges of all age groups."
The study concludes with six steps that must be taken to capture the financial potential of older employees to benefit the economy:
- Recognizing bias.
- Eliminating the misconception that older workers cost too much.
- Fostering an inclusive workforce.
- Increasing the use of flexible work options such as part-time work or phased retirement.
- Creating increased training opportunities whether on new technologies, new programs or new positions.
- Investing in a multigenerational workforce.
Each of these elements requires commitment and hard work to achieve. It is not just the law that compels their success. It is not just the fact that it is the right thing to do. It is the economic reality that the economy will be more robust with the elimination of age discrimination and the development of multigenerational workforces.
So, what happened to my father's firm? When he arrived, there were about 20 attorneys. Today, it is still going strong as an AmLaw 100 firm with over 600 attorneys. Do you need more economic proof than that?
Reprinted with permission from the August 19, 2021 issue of The Legal Intelligencer. © 2021 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.