Unintended consequences of age discrimination laws

September 14, 2005

Free Market Foundation

Sooner or later Americans will have to work longer and retire later, says the Washington Post’s Robert J. Samuelson. Age discrimination laws are intended to ensure that older workers can keep their jobs or get new ones. But Samuelson points out that they have unintended effects:

Age discrimination laws act much like minimum wage laws by protecting higher wages and benefits for people with jobs; but by increasing labour costs to artificially high levels, they discourage the hiring of some older workers and lead to the “downsizing” of others.

On average, older workers cost employers more than younger workers because they benefit from seniority or accumulated merit and their health costs are also higher; the Age Discrimination in Employment Act makes it hard for employers to offset older workers’ higher costs.

Companies attempt to resolve the conflict by offering older workouts buyouts; in accepting voluntary early retirement, workers typically sign releases agreeing not to sue for age discrimination.

The current system encourages earlier retirement among career workers and frustrates their re-employment. To change this, Samuelson recommends reviewing age discrimination laws to make it easier for companies to keep career workers and allowing people to buy into Medicare at ages 62 or 65 while still working.

Source: Robert J. Samuelson, “Retirement at 70 (Cont’d),” Washington Post, August 24, 2005.

For text:
http://www.washingtonpost.com/wp-dyn/content/article/2005/08/23/AR2005082301175.html

For more on Older Workers:
http://www.ncpa.org/iss/eco/i_employment.html#workforce

FMF Polocy Bulletins/ 6 September 2005