Did the Great Recession Trigger 'Pent-Up' Age Discrimination?

A new academic study argues that state age-discrimination laws didn’t help and may even have hurt older workers during and after the Great Recession. According to one possible explanation offered in the paper, strong state laws made it hard for employers to discriminate against older workers in ordinary times, creating “pent-up demand” to ditch them when the recession hit.

That is a “conjecture,” not a proven fact, authors David Neumark and Patrick Button of the University of California at Irvine concede in the April 7 issue of the Federal Reserve Bank of San Francisco Economic Letter. Neumark has written extensively about unintended consequences of various government actions, arguing that raising the minimum wage makes it hard for unskilled workers to get jobs.

The truth is that it’s not even clear how much age discrimination older workers as a group suffered in the Great Recession. Neumark, an economics professor at Irvine, and Button, a Ph.D. candidate, point to data showing that the median duration of unemployment for older workers more than tripled during and after the recession, while the duration of joblessness only doubled for younger workers.

But one important statistic goes against the age-discrimination thesis. According to Bureau of Labor Statistics data, older workers were the only ones whose employment increased between the beginning of the recession in December 2007 and the beginning of 2012. For men 55 and older, the increase was 13 percent. For women it was 14 percent. In contrast, employment fell 10 percent over the period for men and women aged 35 to 44. Where’s the age discrimination?

In an e-mail response, Neumark said “nothing in the paper really lets me” judge the overall level of age discrimination. He noted that the paper focused on the differences between states with strong and weak age-discrimination laws.

There are other mysteries. Daniel Hamermesh, a labor economist at the University of Texas, said in an interview that it’s puzzling that the Irvine results were different for men and women. According to the paper, men tended to stay unemployed longer if they lived in states with stronger remedies for age discrimination, but for women it was the opposite. That seems to weaken the idea that age-discrimination laws made a difference. “It would certainly be fair to raise this as an unanswered question,” Neumark wrote in an e-mail response.

Neumark and Button conclude that strong state laws do help older workers in normal times, but weren’t much protection in the Great Recession. The pent-up-demand conjecture is that “a sharp downturn gives employers cover to engage in age discrimination.” A second conjecture is that overall unemployment was so high in the recession that the legal system couldn’t sort out what part of it might have been due to discrimination. And a third conjecture is that when demand became weak and uncertain, employers “became especially wary of hiring older workers” in states with strong discrimination proscriptions for fear of being sued if they had to lay them off.

They conclude that age-discrimination laws could be modified to “make it harder [for employers] to appeal to changes in business conditions” as a defense. “In addition,” they write, “affirmative policies that would encourage hiring of older workers might be helpful.”

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