Are Younger and Older Workers Fighting for Jobs?
There was a spate of media stories recently on a US report finding that increased employment of seniors has no negative impacts at all on young people also seeking work.
In fact, the study by leading US economist Alicia Munnell, looking mainly at the experience of US states, did say that the so-called â€œlump of labourâ€ fallacy may be true when an economy is experiencing very high unemployment and extended stagnation. (p.5)
In Canada as a whole, the employment rate for all workers 15 and over was 61.8% in 2012, while it was 54.5% for young workers age 15 to 24, and 12.0% for workers age 65 and over. (Data from Statistics Canada, CANSIM 282-0002) It is notable that the while the overall employment rate has fallen from 63.5% in 2008, the employment rate of older workers has risen (from 9.8% in 2008) while the employment rate of younger workers remains well below the pre-recession level of 59.7%.
There are some provinces â€“ notably Manitoba, Saskatchewan and Alberta â€“ where the employment rate for young workers age 15 to 24 and for workers age 65 and over are both well above the national average. In a tight labour market, jobs are more readily available for both younger and older workers, raising the employment rate for both groups.
In Alberta, for example, the overall employment rate in 2012 was much higher than the national average at 70.0%, and also well above average for young workers (62.3% vs 54.5%) and for workers age 65 and over (18.4% vs. 12.0%.)
The impact of a tight job market seems to be greater for older than younger workers, raising the employment rate relative to the national average by 53.3% compared to 14.3%.
Ontario, by contrast, had an overall employment rate of 61.3% in 2012, a bit below the national average. Meanwhile, the employment rate for Ontario workers age 65 and over was 12.6%, a bit above the national average. The employment rate for young workers in Ontario was 50.0%, well below the national average of 54.5%.
In Ontario, it seems that older workers have been relatively much more successful finding jobs in a soft job market than have younger workers. The same is true of British Columbia, where the overall employment rate is a bit below average, older workers match the average national employment rate for this age group, and younger workers lag behind the national average.
However, the opposite is true of Quebec. The overall employment rate in 2012 was 60.0%, a bit below the national average, while the employment rate of workers age 65 and over was 8.6%, well below the national average. But the employment rate of younger workers in Quebec was 57.5%, significantly above the national average.
In a relatively slack job market, it seems plausible that there is some competition between older and younger workers for jobs, and that older workers generally tend to do better because of long job tenure and greater work experience.
How then to explain Quebec? Perhaps youth employment policies have made a difference?
The framing of this story by Matt Sedensky and the report by Munnell and Wu is nonsense. Their basic argument is Say’s Law on steroids. Instead of saying “supply creates its own demand” outright, though, they say that people who doubt supply creates its own demand must assume there demand for labor is fixed. I’ve researched the history of the lump-of-labor claim and, trust met, it emerges from some of the most rabid anti-trade union diatribes of the 19th century. Both A.C. Pigou and Maurice Dobb, among others lesser known, pointed out that the fallacy claim was itself based on a fallacy. One result in Munnell and Wu’s report looks particularly suspicious. A one percentage point increase in the employment rate of older people is associated with a 0.28% increase in the wages of young. In the next paragraph, they find a negative effect in the recession of employment of old people on wages of prime age workers but dismiss the result as an anomaly. These peculiar results suggest they haven’t specified their regressions particularly well. I had a closer look at a similar report from Belgium a few years ago looking at early retirement and was appalled that they ran their mechanical regressions without acknowledging that the period they were studying included the major restructuring of the crucial iron and steel industry. That’s why the early retirement program was brought in — to facilitate the elimination of jobs, not opening them up to the youth.
It may be what you are seeing is caused by retired workers moving to areas of higher unemployment to take advantage of the lower cost of living and better weather, rather then how difficult it is for them to find a job.
I do think a good study on senior’s employment is seriously needed- especially given the rise over the past 10 years. It is both large in terms of numbers, and in percentage of retirement aged elder workers now engaged in waged work.
If the trends and the current stock persists of elder workers- we may need to reexamine some labour market standards as well as traditional management policies in areas such as health and safety, worker rights and such interfaces to work.
I am not saying elder workers are a curse or a blessing- I will save that for the workers themselves- but I have a feeling much of this increase is due to necessity and not some fantastic accounts I have heard of life enrichment.