Retirement & Financial Planning Report

Among the side effects of longer working careers for older persons that employers may fear—and may use as a justification for spurring turnover—is a potential squeezing out of younger workers, but studies of that issue do not support cause for concern on that score, says a report by the Center for Retirement Research.

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The report said the squeezing out theory has been used in workplace analysis for more than a century, and is based on the notion that there is a limited amount of work to be done, and that those who stay in the workforce longer—or work more hours when they do work—are eliminating opportunities for others. That is sometimes called the "lump of labor" approach.

However the report looked at various studies into the issue and said that none of them found evidence that increasing the labor force participation of older persons reduces the job opportunities of younger persons, it said. "Indeed, the evidence suggests that greater labor force participation of older persons is associated with greater youth employment and reduced youth unemployment."

That conclusion remains the same when data are analyzed by age, gender, education or state of residence, it said. It also holds true when wages, not numbers of jobs, are analyzed.

"Convincing employers and policymakers that the lump-of-labor theory does not hold is extremely important, given the state of the U.S. retirement system and the need for people to work longer in order to have a secure retirement. Employers already have reservations about older workers, so adding the false argument that retaining older workers hurts younger ones could impede the ability of older workers to remain in the labor force. Therefore, the lump-of-labor theory needs to be put to rest. The theory may sound plausible, but the data do not support it," the report said.

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