Amid all the woeful tales of the downturn's Lost Generation -- the former tech aristobrats scooping ice cream in Palo Alto and the Wall Street wunderkinds folding khakis at Gap -- is one possibly bright bit of news. Unlike the early '90s recession, when it seemed as if the blade fell heaviest on older, white-collar workers (remember all those ashen-faced, fiftysomething managers shuffling out of AT&T [T ] and headed for a suburban-basement consulting businesses?), this time the grayhairs seem to be faring surprisingly well.
The percentage of men aged 55 to 64 with jobs rose to 67.2% from 65.9% over the past year, while the share of women in the same demographic climbed to 54.4% from 51.7%. Overall, labor-force participation among older workers is up a remarkable 32% from a decade ago. The wrinkled, wing-tip types who were cast aside during the last boom as hopelessly Old Economy are now enjoying their revenge. With their broad range of skills and seasoned history of muscling through downturns, they're the chosen people of HR land, the ones companies are banking on to bail them out with some bread-and-butter basics.
Corporate America clearly fears a sequel of the 1990s. When the economy started to sizzle with an unanticipated ferocity, companies that had cut too many in their brain trust were left flatfooted and unable to compete. In addition, some of those same companies that slashed deep and wide were later burned by a rash of class actions for age-discrimination brought by workers aged 40 and older who were protected by federal labor laws. Lockheed Martin (LMT ), Ameritech, and GE (GE ) all lost such suits.
Now, labor lawyers say, companies are being more fastidious about not cutting too deeply into the over-40 ranks for fear of inviting lawsuits. Notes Michael Droke, an employment lawyer in Seattle at Dorsey & Whitney, "Under 40, you have virtually no case." Moreover, companies are no longer axing entire business units or departments as they did in the early '90s. Instead, they're using performance and skill sets as a measure of who to keep and who to can, and retaining those with the wide swath of experience necessary to take over the orphaned workloads of the laid off -- often doing the jobs of two and three people.
That usually means older, seasoned workers. Shel Hart, vice-president at staffing firm Spherion, says senior workers are getting placed 30% faster than those in the 25-to-45 set. "Companies are tied at the purse strings, and they can't afford to take risks," says Hart. "They need a quick return on investment. They need people with expertise."
Not that these older workers aren't hanging in by choice. Many of Corporate America's new sitting bulls are staying put because they have to. With their retirement funds devastated over the past several years, their vastly diminished fortunes leave them no choice.
In some quarters, that means they're clogging up the promotion track, creating gridlock at the top and leaving middle managers and workers in their 40s treading water. Stuck with the same salaries but faced with higher health-care premiums, many of these younger workers feel as if they're falling behind, say workplace experts. "This is a huge trend, and it's rising rapidly month by month," says Mark Zandi, Economy.com's chief economist.
Being forced to delay retirement isn't solely a function of a poorly performing stock market, however. Recent research by Ross Eisenbrey and Matthew Walters of the Economic Policy Institute notes that the aging of the labor force began in August, 1998, when the Dow Jones industrial average was still on a tear. From that point to October, 2002, the share of older workers in jobs grew to 22.9% from 20.1%, while the rate of workers aged 25 to 54 fell by 1%.
By the time the stock market began to tumble in 2000, the labor-force participation rate of older workers had already grown by 5.2%. The trend stems in part from demographic reality: There simply aren't enough thirty- and fortysomethings to make up for all those baby boomers. Eisenbrey and Walters believe that because the rise in older workers predated the bust, bad portfolios and demographics can't be entirely blamed. Their explanation? Declining health-insurance coverage for retirees.
Here's the theory: The New Economy boom coincided with a major new cost-saving initiative in Corporate America: going after the benefits previously promised to retirees. Companies are whacking retiree medical care, doing away with cost-of-living adjustments on pensions, and chiseling at 401(k) contributions. This has sent older workers back to the calculator to try to figure out their retirement income.
One New Jersey man, a Verizon (VZ ) retiree, says he and his wife haven't had to pay a dime for health-care coverage during their golden years -- until now. Next year, they're on the hook for $2,250. Many other retirees just like them, after being promised free medical care for life, say if they had known their former employers were going to rewrite the deal, they could have planned by saving more.
Now it's too late. The Bush Administration's recent approval for companies to convert pensions into cash-balance plans will probably exacerbate the trend. Such cash-balance plans often gouge older workers the most. Already, nearly three-quarters of baby boomers surveyed by Allstate (ALL ) say they have no plans to fully retire.
So, you better watch out what you say to the boss. He's probably not going anywhere.
By Michelle Conlin in New York
Edited by Douglas Harbrecht