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Discrimination against the older worker: psychology and economics (2005)

Discrimination Age Discrimination

Of Working Age - A Seminar on Age Discrimination in the Workplace

Discrimination against the older worker: psychology and economics

Speech by Rob Ranzijn , University of South Australia

 


Abstract

When considering age discrimination in employment it is important to distinguish between older workers who are unemployed and those still in employment. One reason why those who are unemployed usually have great difficulty in finding a new job is that their accumulated skills and experience have little currency in the modern workplace. Those who are employed are valued for their task- and organisation-specific skills and experience. Three important myths about older workers concern their trainability, attitude to change, and anticipated productivity. This paper argues that most employers, and society as a whole, are not sufficiently aware of the new realities of ageing and the implications this has for the workforce. The central issue is not that the mean age of workers is increasing but whether productivity can be maintained. The discussion is placed in the context of the pressures on employers to maintain profitability and effectiveness. It is concluded that in general age discrimination is not a function of a negative attitude towards older workers but based on an implicit cost/benefit analysis. Education, of both employers and older workers, is required to correct the invalid assumptions of this analysis in order to increase mature aged workforce participation. Organisations which are not proactive in addressing these issues are likely to be at a competitive disadvantage when the impact of labour shortages really starts to hit.

Acknowledgments.

I wish to acknowledge my research colleagues Ed Carson, Tony Winefield, Margaret Patrickson, Helen Marsden, Bridget Garnham and Carolyn Corkindale, and the participants in the research projects. The research has been supported by the Australian Research Council through a Discovery grant (DP0211679) and by the University of South Australia through a number of Divisional Research Performance grants.

Discrimination and stereotypes

It is hard to argue against the claim that older job-seekers are discriminated against, since their success rate in finding a job is so much less, and their length of unemployment is so much longer, than those of younger job-seekers. Older workers who are in employment are also discriminated against, since they are offered training opportunities at a much lower rate than younger workers.

Discrimination is usually a consequence of stereotypes, which may or may not be erroneous. A stereotype is a general impression about a group of people, objects or activities. Stereotypes have a very useful function in reducing cognitive load, since it is not possible to make intimate acquaintance with all the individuals we meet, see or hear about in order to make accurate judgements about them. It is a basic survival strategy to use short-hand representations (stereotypes) about groups of people in order to function effectively. A stereotype may lead to prejudice (a negative attitude) but it may also lead to a positive attitude (eg the Salvation Army is good because it helps poor people), and it may also be neutral, with no emotional content.

How do people form stereotypes? Stereotypes are formed out of input from the environment, including what people are told by their family members or friends, personal exposure to members of the stereotyped group, books and journal articles, and images and information in the media.

The academic literature on the competencies of older workers mainly presents 'positive' images, often emphasising their reliability, punctuality, positive work ethic, wealth of life and work experience, and wisdom. However, research also shows that many people hold negative stereotypes about older workers, including that they are resistant to change, inflexible, less able to learn new skills, and less capable of adapting to modern work requirements. This mixture of positive and negative inputs contributes to an ambivalent impression about older workers.

An important distinction: unwanted job-seekers and valued current employees

When discussing age discrimination in employment, we need to distinguish between unemployed job-seekers and older workers who are currently employed.

Take unemployed workers first. The human impact of mature aged unemployment is profound, with serious social, psychological, and short-term and long-term financial implications over and above those affecting younger unemployed people. One of the many psychological consequences is frustration about not being able to use the skills and experience accumulated over decades of employment. Older unemployed people commonly decry the waste of their human capital which could be used for the benefit of society. After many attempts to get a job, any job, it comes as a severe shock to realise that their skills and talents are not valued in the marketplace.

This is because what prospective employers look for is the best match between the prospective employee and the skills required to perform a specific task in the work environment of that specific organisation, not the skills and experience accumulated in a different workplace in the past.

Regarding currently employed older workers, research shows that they are highly valued because of their expert ability to fulfil their roles in the organisation. Apart from fulfilling their specified task requirements, these may include mentoring of other staff and contributing wisdom, calmness and a long-term perspective to the mix of talents and abilities of a multigenerational work team.

However, when it comes to employing new people there is a different story. In order to try to understand why older job-seekers have poor success in the marketplace, our research team asked employers to rate how important the following work-related attributes were when deciding whether to take on a new recruit: task-related skills and competencies (often called 'hard skills'), three categories of 'soft skills' (teamwork, interpersonal, and thinking skills), what we called 'work personality' (motivation, enthusiasm etc), and general personality (reliability, conscientiousness etc). 700 workgroup managers and employees in those workgroups, from all parts of Australia and across the full range of types of industry, took part in this study. Figure 1 shows that all the categories of attributes were rated as important but the most important were considered to be interpersonal skills, work personality, and teamwork skills.

Image: Figure 1. Rated importance of hard and soft skills and personality in recruitment decisions

Figure 1.

Rated importance of hard and soft skills and personality in recruitment decisions.

Since the literature indicates that the strengths of older workers include life experience, positive work ethic, and wisdom as well as work experience, on these results they should be favoured over younger workers in recruitment decisions. However, we found that, apart from hard skills, older workers are perceived as not being as good as their younger workmates, as the Figure 2 demonstrates.

As part of the same survey, we asked participants to think of an actual workmate in each of six age-groups and rate that person on these six categories of attributes. If there was no-one in any particular age-group they skipped that set of questions. The figure shows that, up to age 64, older workers were considered to be better at hard skills, but for all other categories they were viewed less positively than their younger counterparts.

Figure 2. Mean ratings of different age-groups of target employees on human capital (from Ranzijn, 2004)

Figure 2.

Mean ratings of different age-groups of target employees on human capital (from Ranzijn, 2004).

Although the differences between the age-groups are not great, they may nevertheless mean the difference between employing a younger rather than an older person in a competitive environment where profit margins are slim. It could be argued that these results are only perceptions, and therefore may not be objectively accurate. However, perceptions are the crucial factor, since it is subjective impressions and perceptions that determine whether or not an employer hires a particular person. No matter how good a person may actually be, if the employer does not think they will be any good they will not hire them.

Older workers in the new world of work

I'd like to talk for a while now about the role of older workers in the modern work environment. How are older workers faring in 'the new world of work'? Unfortunately, their much-touted 'virtues' of reliability, conscientiousness, and so on, may actually count against them in the contemporary work environment, where the fashionable virtues are creativity, innovativeness and entrepreneurialism, qualities more commonly associated with youth. Reliability and conscientiousness in an older person may even be regarded as stodginess and inflexibility, liabilities instead of assets.

The modern world of work is characterised by constant change, requiring continuous adaptation and updating of skills. To what extent are older workers adaptable and trainable?

In an interview study conducted late last year we asked work-group managers about their older workers' attitudes to change and their ability to learn new skills compared to younger ones. In general, they said that age in itself was not a factor, that it depended on personality and individual attitude more than anything else, and that on average there were no differences. While many said that young people embrace and welcome change, others commented that the older workers have had to adapt to change throughout their working lives and that they accept change as a fact of working life. Similar comments were made about trainability. They said that different age-groups may have different preferred learning styles, but once the need to up-skill is explained and understood workers of all ages are equally able to learn new skills.

Trainability of older workers: cost/benefit analysis

However, in addition to the interview study we also performed a survey about perceived trainability, in which we asked the question slightly differently. Assuming that one of the main concerns for managers was productivity, we asked 169 workgroup managers to rate workers in six different age-groups on the extent to which training in a range of skills would represent a return on investment.

In the Figure 3, a score of 1 indicates 'no return', 2 equals 'some return', 3 represents 'moderate return' and 4 indicates 'large return'. The figure shows that the investment in training is considered worthwhile for all age-groups, but that the return on investment is expected to decline linearly with age. It follows that it is more sensible economically to train younger workers than older ones.

Figure 3. Expected return on investment in training of different kinds of skills, by age-group of employee.

Figure 3.

Expected return on investment in training of different kinds of skills, by age-group of employee.

The cost/benefit analysis takes into account two considerations: the anticipated increase in skill level, translating into improved productivity, and the length of time that the employee is expected to remain with the organisation. These results indicate either that the managers expect the skills of older workers will not increase after training as much as younger workers or that older workers will not stay as long. Both of these assumptions are questionable.

I'd like to digress for a while to make some points about training of older unemployed job-seekers. Many mature aged job-seekers were competently holding down responsible positions when they were made redundant due to organisational restructures or lost their jobs when their organisation collapsed. Without constant upgrading, skills depreciate even for people who are employed, but skills atrophy much more rapidly through disuse. Furthermore, separation from work means that unemployed job-seekers may not be keeping up with changes and developments in contemporary work practices and requirements, and their social capital is likely to become depleted through losing contact with their personal networks. As a result, it may take more effort to get an older job-seeker up to speed than a younger one, especially after a long period of unemployment. In order to keep older job-seekers employable, early intervention is essential, consisting of upgrading generic skills as well as training for a new job, possibly in an entirely different occupation. It is pleasing to see, in the 2005 Budget, that more money is being allocated towards early intervention and more targeted training.

Since age does not predict work performance or trainability, there is no reason, possibly apart from physical health and strength factors needed for certain occupations, why apprenticeships and other training schemes should be limited to younger people. There is no reason why people in their 40s, 50s or beyond can't learn entirely new and different trades and occupations if they want to. An example from one of our studies is of a man in rural Victoria who used to be a manual worker but, due to external and personal circumstances, lost his job and eventually retrained in a totally different field, as a youth worker with homeless people. We need to loosen our shackled thinking which locks people into rigid categories based on what they have done in the past. An 'unskilled' worker is not equivalent to an unintelligent one, they just may not have had the opportunity to try a 'skilled' occupation yet.

'Workforce ageing': it's about productivity, not age

What does workforce ageing really mean? The central issue is not that the mean age of workers is increasing but that the relative size of the workforce is reducing. Workforce ageing is about productivity, not age, and focusing on 'the older worker' as an older person rather than an individual may actually be a barrier to developing workable policies to address the serious issues arising from a reduced workforce. We also asked employers what their policies were regarding workforce ageing. Hardly any organisations had a coherent and well-developed policy, and in most cases the ad-hoc procedures were focussed on holding onto their older workers 'just a little longer'. There is an urgent need for more creative policy approaches.

A reduced workforce raises questions about maintaining productivity, since there are limits to what technology can achieve as well as limits to how much harder people can work. Another policy solution that has been proposed is increasing the birth rate (although this policy initiative, emphasised in the 2004 budget, is strangely absent from the 2005 budget, which is aimed at getting mothers into the workforce as quickly as possible). Another suggestion is to import more skilled workers, which is likely to have at best a short-term effect. The most viable solution seems to be to focus on getting the best value out of older workers.

The new realities of ageing

There is an urgent need to increase the awareness of employers, and society as a whole, about the new realities of ageing and the implications this has for the workforce.

Increasingly, evidence shows that older workers are trainable in new technology, that they are cognitively able to keep up with demanding intellectual work, that they have lower injury rates, and, apart from occupations requiring physical strength and exertion, they are physically healthy until well into their 60s or beyond.

Society needs to undergo a paradigm shift in its understanding of ageing. A 50-year-old is only halfway through adult life. A 50-year-old is in the prime of life, nowhere near the end of life. 70 is not old. A man who retires at 70 is likely on average to live well into his 80s and a woman to almost 90. A 70-year-old retiree today is likely to have a much longer post-retirement life, and furthermore to be in better functional health, than a 65-year-old retiree thirty years ago.

Look at the huge demographic shift we are undergoing, which is leading to massive increases in the number of people aged 40 or more and especially aged 55 or more, as Figure 4 indicates.

Figure 4. Australian population and labour force projections 1998-2016 (modified from ABS, 1999).

Figure 4.

Australian population and labour force projections 1998-2016 (modified from ABS, 1999).

These projections come from the ABS. I added the colour, using as cutoff points ages 55, the current average retirement age, and 75, the average healthy life expectancy, the age at which physical problems start to affect normal functioning. The projections assume that the participation rate , as distinct from the number of workers in different age-groups, remains constant. The orange and pink sections together represent the expected huge increase in the number of older people over the next decade and a half. It is also clear that there will be no increase in the number of children or adults under 35.

The orange coloured section shows that there will be around an additional 1.14 million Australians aged between 40 and 54 in 2016 on top of the 1998 figure. This is about the same as the total of the current number of unemployed people (500,000) plus those on disability pensions (700,000), both of which are being targeted in the 2005 Budget as a way to increase workforce participation. Assuming a 50% participation rate in the 40-54 year olds over the next 15 years, this will mean an extra 570,000 people added to the workforce by 2016.

The pink section shows that there will be an additional 1.48 million people aged between 55 and 74 by 2016. A participation rate of say 20% will add 290,000 people to the workforce.

The green section is possibly the most interesting, since it represents the difference between the current population between 55 and 74 years and the number of those people in the workforce, a total of 2.18 million. The participation rate falls off steeply after 55 and there are very few people 65 or more still in the workforce. So even if only 10% more people aged 55-74 were in the workforce that would be an extra 218,000 workers.

Therefore, to increase workforce participation, it makes sense to focus policy initiatives on fit and healthy older people.

How long will older workers keep working? Employers should not necessarily assume that a currently employed or newly recruited 50-year-old will be retiring within a few years. In fact, evidence shows that an older individual, if employed at 50, stays with the organisation on average longer than a 25-year-old, since young people are told to expect, and indeed encouraged, to change jobs every few years. Given what we now know about the competencies and trainability of older workers, recruiting and training an older worker may represent a better return on investment than a younger one. Rather than focusing on easing the transition to retirement, managers should be considering ways of best utilising their valuable older workers for perhaps another 20 years.

Changing stereotypes

Changing stereotypes is a slow process, but two of the most potent factors are exposure and education. Exposure means getting to know older workers as individuals and evaluating each person on his or her merits. Education means providing employers with accurate current information, not just slogans about the merits of older workers which may not resonate with what employers need.

Education also means helping older workers and job-seekers to come up to speed with contemporary work requirements so they can compete on equal terms with younger people. Self-handicapping, people limiting themselves by their own stereotypes about ageing, may also be an obstacle.

It may also be useful to experiment with a different policy approach. Current government policy is a combination of coercion ('if you're thinking of retiring, forget it') and financial incentives to keep working a few more years. Policy does not seem to recognise that older workers may wish to keep developing their potential and that there are many reasons why people work apart from money. For instance, most people want to be generative, to make a contribution, and may well wish to take on interesting and stimulating new challenges and projects. There is much scope for developing policies based on making it attractive for older workers to keep working.

Conclusion

It is unlikely that employers consciously collude to keep older people out of the workforce. On the whole, they work in good faith to maximise the effectiveness of their organisations. They may well have erroneous stereotypes about older workers and may not be fully aware of how serious the labour shortage is going to be very soon. Employers will have no choice before long: they will seriously need to consider what workforce ageing means for their organisations, otherwise they will be caught short. A prudent manager will not wait until there is a real crisis but will address these issues now, by developing individualised strategies tailored to the abilities, circumstances, expectations, needs and wishes of their older employees.

In conclusion, while research shows that older workers are as productive, trainable, and able to cope with change as younger people, employers seem to hold deeply ingrained stereotypes that younger people have more of what it takes to succeed in the modern work environment than older people and that they represent a better return on investment. However, the demographic context is changing very rapidly such that employers will not be able to afford to discriminate against older workers. Education about the facts of workforce ageing, information about the competencies of older workers, and exposure are the keys to turning attitudes around. Organisations which are able to do this most quickly will prosper while those that are slow to change may not survive. Eliminating age discrimination in employment will bring about a win-win situation for all.

Last updated 18 May 2005.