No evidence that older workers are crowding out younger ones

Guest blog from Economics Editor Peter Coy Are older workers crowding out younger ones in this recession? It’s tempting to say so, considering that employment has risen 1% among people 55 while it has fallen 5% among people 20 to 54 (see chart). Andrew Sum and colleagues at Northeastern University wrote a paper last December highlighting the discrepancy. It was called “Out With the Young and In With the Old.”

The poster child for the worker who just won’t quit—though here, child is definitely not the right word—is Emma Shulman, a consulting gerontologist at NYU Medical Center. She is 96 years old and has survived two husbands, more than 70 years of cigarette smoking, and a Scotch habit (“I was a Scotch maniac”), as described in a profile yesterday in The New York Times.

I was gratified to read about Shulman’s continued ventures in the working world because I interviewed her for a 2005 cover story in BusinessWeek called “Old. Smart. Productive.: Surprise! The graying of the workforce is better news than you think.” (That’s Shulman in the middle of our cover.)

The idea that older workers displace younger ones assumes that there’s a fixed amount of work to be done. That’s known as the lump-of-labor fallacy—and it’s at play in the anti-immigration camp as well. By and large, economies don’t work that way. Workers earn incomes and spend the money and the recipients of the money hire more people and off we go. Growth.

Economists Jonathan Gruber of MIT and Kevin Milligan of the University of British Columbia looked at this question in a National Bureau of Economic Research working paper last year, “Do Elderly Workers Substitute for Younger Workers in the U.S.?” They conceded that their conclusion was “relatively weak” but said, “We find no consistent evidence of an impact of the employment of the elderly on the young or prime-aged in our sample.”

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