America’s Aging Workforce: It’s Time for Employers to Accept Reality

By Mary Nichols, on October 22nd, 2008

The current financial crisis in the U.S. is hitting everyone hard, perhaps not least the older population. Many in this age group will have taken early retirement in recent years and may now be starting to feel the pinch due to unexpected price rises. Some of these seniors, along with others who just miss the activity and companionship of the workplace, may be considering a return to work on a full or part-time basis.

In fact, the trend towards earlier retirement in recent decades means that the U.S. has a large non-economically active older population in their 60s and early 70s, many of whom hold valuable skills and experience and who enjoy much higher levels of health and fitness at this stage of life than any earlier generation.
Increasingly, employers will need to tap into this older labor pool in order to ease recruitment difficulties. Demographic changes, including a falling birthrate and the aging of the U.S. population, mean that fewer young people are now entering the labor force. As the first cohort of the baby boomer generation reaches retirement age this year, the labor force can be expected to shrink considerably within a short period of time, even taking into account a continuing influx of immigrants.

Aging Workforce

Moreover, the workforce itself is aging, as reflected in the U.S. Bureau of Labor Market Statistics’ data on the employment participation of different age groups. Between 1977 and 2007, it is reported, there was a 101% increase in the employment of workers aged 65 and above, compared with a 59% increase in total employment. By 2016, it is estimated, the number of workers aged 55 to 65 will increase by 36.5%, while the number of workers aged 65 and over will increase by more than 80%, with the latter group accounting for more than 6% of the total labor force by that time.

Simple supply and demand considerations, therefore, suggest that future employment opportunities for older people will be good. Moreover, a raft of legislative and policy changes over recent decades, including the Age Discrimination in Employment Act (ADEA) of 1967 and the elimination of mandatory retirement in 1986, have also theoretically improved recruitment and retention prospects for the country’s seniors.

Yet there is evidence that age discrimination on the part of employers is rampant in the U.S., hindering not only the opportunity for older people to improve their finances but also potentially hampering the ability of the labor market to adjust to the demographic changes. Equal Employment Opportunity Commission statistics show a vast increase in age discrimination lawsuits in recent years, while research studies also provide evidence that age discrimination is widespread, at least in terms of recruitment and displacement, if not in terms of earnings. However, this is often very subtle and more difficult to prove than other forms of discrimination; for this reason it is likely that the statistics vastly under-estimate its true extent.

Benefits of Retirement-Age Workers

Studies have suggested that many employers are reluctant to hire older workers as they fear higher healthcare and insurance costs and hold concerns about their abilities and likely productivity. In fact, while there is some evidence that physical strength steadily declines after the age of 40, research has also indicated that there is little deterioration in mental faculties until over the age of 70. Moreover, published case studies of organizations in the U.S. and Europe that actively recruit and retain older workers, including McDonalds and the book retailer Borders, provide evidence of many benefits of such policies, such as lower rates of absenteeism, lower turnover, higher profits and improved customer satisfaction.

The increased employment of older workers is also likely to bring wider economic benefits to the U.S. by helping to ease the burden on the Social Security and pensions schemes resulting from early retirement patterns and the increased lifespan of Americans. A remaining barrier, however, is the restrictive pension scheme regulations which often deter older people from continuing to work beyond retirement age or re-entering the workforce. The U.S. may be well-advised to consider adopting the type of gradual retirement programs already in place in many Scandinavian and European countries.

References

Adams, S.J. & Neumark, D. (2002). Age Discrimination in U.S. Labor Markets: A Review of the Evidence. Public Policy Institute of California Working Paper No. 2002-8.

Anonymous (2007). Age discrimination: don’t let the joke be on you; Best practices from JD Wetherspoon, the Metropolitan Police and McDonalds. Human Resource Management International Digest, 15, 3, 21-23.

Conference Board of Canada (2006). Canada’s Demographic Revolution Adjusting to an Aging Population.

Crampton, S.M. & Hodge, J.W. (2007). Age Discrimination and Downsizing. The Business Review 7, 1, 341-347.

Dychtwald, K., Erickson, T.J. & Morison, R. (2006). Workforce Crisis : How to Beat the Coming Shortage of Skills and Talent. Harvard Business School Press.

Kantarci, T. & Van Soest (2008). Gradual Retirement: Preferences and Limitations. De Economist, 156, 2; 113-144.

MacNicol, J. (2006) Age Discrimination: An Historical and Contemporary Analysis, Cambridge: Cambridge University Press.

McMahan, S. & Philips, K. (1999) America’s Ageing Workforce: Ergonomic solutions for reducing the risk of CTDS. American Journal of Health Studies 15, 199-202.

Santora, J.C. & Seaton, W.J. (2008). Age Discrimination: Alive and Well in the Workplace? The Academy of Management Perspectives 22, 2, 103.

Turner, J.A. (2008) Work Options for Older Americans: Employee Benefits for the Era of Living Longer. Benefits Quarterly, 24, 3, 20-26.

U.S. Bureau of Labor Statistics (2008). Spotlight on Statistics: Older Workers. July 2008. Retrieved from http://www.bls.gov/spotlight/2008/older_workers/



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Financial Bailouts: Is the U.S. on the Road to Socialism? (Part 1)

By J.D. Seagraves, on October 22nd, 2008

All nation-states reside somewhere on the continuum between laissez-faire and total-state central planning. No country is completely capitalist and no country (with the possible exception of North Korea) is entirely socialist. So how are we to define roughly “capitalist” and “socialist” countries? Where is the dividing line? How do we know if we are still a capitalist country?

Ludwig von Mises said the difference between a roughly capitalist country and roughly socialist one was a functioning stock market. In a socialist country, Mises said a market simply could not function. With the recent unprecedented interventions into the economy, the stock market isn’t functioning. Is this a temporary setback or have we passed a crucial threshold into socialism?

In this first of a two-part blog series, I will examine how the American system compares to the 10 planks of Karl Marx’s Communist Manifesto . According to Marx, these were the ten preconditions a country needed to meet before transitioning from capitalism to socialism.

1. Abolition of property in land and application of all rents of land to public purposes.

We still use the term “real estate,” which is derived from the historic “royal estate,” meaning that royalty (the government) was the true owner of all lands. Although the U.S. has a noble history of homesteading and laissez-faire, we now impose property taxes on the supposedly private property of individuals and evict them if they don’t pay. That sounds an awful lot like the rent system of feudalism and Marx’s manifesto.

Eminent domain further calls into question whether people really own their land. The Constitution, itself a step away from the comparative laissez-faire of the Articles of Confederation, gave the federal government the authority to seize private property for public purposes. Now, thanks to the Supreme Court’s Kelo Decision, government at all levels can take “your” land and give it to Wal-Mart for the “public purpose” of “economic development.”

2. A heavy progressive or graduated income tax.

Although the top marginal tax rates have dropped considerably from the peaks above 90%, the graduated income tax is a staple of the U.S. economic order. Barack Obama would raise taxes on the wealthiest, making the tax code more “progressive,” but John McCain wouldn’t undo the progressivism of the code: it’s here to stay.

3. Abolition of all right of inheritance.

We still have the right to transfer property upon our deaths, but that right is subject to taxation. Still, not “all rights” of inheritance have been abolished, so I guess we fail to meet Marx’s third condition.

4. Confiscation of the property of all emigrants and rebels.

We don’t quite meet the grade here, either. No one dare act in open rebellion to the all-powerful federal government — we haven’t had any “rebels” since the War Between the States, in which the North followed Marx’s prescription and confiscated the property of rebels. Marx, it is said, was an admirer of Lincoln.

5. Centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.

There’s no ambiguity whatsoever here: we have exactly the system Marx envisioned in the Communist Manifesto. And what’s more, there’s literally no disagreement on the matter between the nation’s dominant political parties.

Credit is centralized in the hands of the Federal Reserve, the country’s national bank. The Federal Reserve System acts as a cartel with an exclusive monopoly on credit and money creation. Thus, the government can easily fund pseudo-Marxist schemes via its printing presses — which has allowed it to cut back on Marx’s heavy progressive tax code. Even Marx could not have imagined the willingness with which people all over the world trade real goods and services for essentially worthless paper notes. In this area, we’ve out-Marxed Marx!

Next time, I’ll look at the remaining five planks:

  • Centralization of the means of communication and transport in the hands of the State.
  • Extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands; and the improvement of the soil generally in accordance with a common plan.
  • Equal liability of all to labour. Establishment of industrial armies, especially for agriculture.
  • Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country, by a more equable distribution of the population over the country.
  • Free education for all children in public schools. Abolition of children’s factory labour in its present form. Combination of education with industrial production.


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Collapse of Auction Rate Securities Market Under Investigation by Justice Department

By G.L.C., on October 22nd, 2008

An auction rate security generally refers to a debt instrument with a long-term nominal maturity for which the interest rate is regularly reset through periodic auctions. It allows issuers to borrow for the long-term but at lower, short-term interest rates.

The auction-rate securities market involved investors buying and selling instruments that resembled corporate debt whose interest rates were reset at regular auctions, some as frequently as once a week. They were sold as being safe as cash.

Over the years, auction-rate securities became popular among investors looking for cash-like options with slightly higher yields than money-market funds and certificates of deposit. The investments—in reality, long-term bonds—were considered more like short-term debt because they could usually be sold at weekly or monthly auctions.

In August 2007, investors began pulling out of the auction-rate-securities market. It seized up earlier this year when Wall Street firms who kept auctions from failing by stepping in to buy any unpurchased securities stopped supporting the market en masse, leaving millions of investors without access to investments they believed were nearly as liquid as cash. Tens of thousands of investors nationwide — including institutional and individual investors, cities and towns, charities and small businesses — were left holding damaged, illiquid securities when the market collapsed.

The U.S. Justice Department is now ramping up criminal investigations into the collapse of the auction rate securities market. Federal prosecutors in Brooklyn,New York , are looking at whether Lehman Brothers Holdings Inc. defrauded its clients by dumping auction-rate securities into their accounts before the market broke down despite knowing the market could collapse. The prosecutors are probing Lehman’s handling of investments for two brothers, Brian Maher and Basil Maher. The brothers sold their family’s billion-dollar shipping business and invested some of the proceeds with Lehman. They lost access to $286 million that was tied up in the securities when the auction-rate market collapsed. Another issue being probed is whether the firm used clients’ money to purchase the securities to prop up auctions that might otherwise fail.

Federal Prosecutors are also probing the role of UBS employee David Shulman to decide whether to charge him with insider trading for selling his own holdings of auction-rate securities ahead of that market’s collapse. Shulman ran the auction rate securities business for UBS. As the credit crisis began to scare away buyers for many types of securities, UBS began to buy up the securities so that the auctions, which the firm ran, wouldn’t fail. Shulman was under pressure from UBS executives to reduce the firm’s holdings of the product, and he allegedly helped mobilize UBS brokers to sell more of the securities to customers as safe cash alternatives, despite his knowledge that the market may not hold up. Around the same time, Shulman sold more than $6 million of his own inventory of auction rate securities.

So far, most investigations have been about the role played by institutions and banks. These investigations are among the first to look at whether individuals committed crimes as the market collapsed in the credit crisis – a step in the right direction.



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