Are companies more likely to fire older workers in mass layoffs?
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Are companies more likely to fire older workers in mass layoffs?
Tech and media companies have slashed tens of thousands of jobs in the last year amid slowdowns in their markets and fears of a recession, with the software company Salesforce, for instance, recently laying off 10% of its workforce.
When employees are let go during times of economic uncertainty, older workers may be especially vulnerable.
Age-discrimination lawsuits have been brought against companies, including tech giants like IBM, alleging that they laid off older workers with the aim of hiring younger ones in their place.
A court filing revealed that IBM executives exchanged emails about wanting to hire more millennials and fire older workers, with one executive referring to them as “dinobabies,” Bloomberg reported in early 2022.
What past recessions can reveal about layoffs
A working paper from the National Bureau of Economic Research by economists Gordon Dahl and Matthew Knepper looked at whether age discrimination increases during recessions. The authors examined age-discrimination charges filed with the Equal Employment Opportunity Commission between 2005 and 2015, then compared them with monthly state and industry unemployment data.
“Age-related firing and hiring charges rise by 3.3% and 1.6%, respectively, for each percentage point increase in a state-industry’s monthly unemployment,” Dahl and Knepper wrote.
The authors said that an increase in reports of discrimination doesn’t prove that employers discriminated against these workers. They controlled for that by looking at cases that had “merit,” which they defined as entailing “a lengthy follow-up investigation as needed.”
And yes, they found that cases with merit do indeed increase in a poor economy.
Researchers say it used to be commonly thought that older workers were safer from layoffs than younger workers. However, this changes when you control for factors like the amount of time workers have had their jobs.
A 2011 Urban Institute study by Richard Johnson and Corina Mommaerts looked at how layoffs affect different age groups, using data between 1996 and 2007, before the Great Recession. The inquiry found that older workers were “less likely than younger workers to lose their job.”
“But only because they generally have spent more time with their employers,” Johnson and Mommaerts wrote.
When they controlled for characteristics like job tenure, they found that older workers were “just as likely as younger workers to lose their jobs.” Regarding workers employed for the same amount of time, they concluded that men aged 50 to 61 were “significantly more likely to become displaced from their jobs” than men between the ages of 25 and 34.
“As long-term employment relationships become less common at older ages, the existing layoff advantage for older workers may erode further,” they wrote.
A 2009 study from Alicia Haydock Munnell, Dan Muldoon and Steven Sass published by the Center for Retirement Research at Boston College found that while younger men faced higher rates of unemployment during turbulent periods in the 1970s and 1980s, unemployment rates were similar for older and younger men during the Great Recession.
They wrote that older workers may be less secure because their median tenure had decreased and the displacement of older workers in the manufacturing sector had risen, affecting the overall unemployment rate for this cohort.
Do employers try to replace older workers with younger ones?
The protections that older workers enjoy, or lack thereof, can vary depending on the industry they’re in, the company they work for and the time they’ve held their job.
“I don’t think we can think of older workers as a monolith,” said Patrick Button, an associate professor of economics at Tulane University who studies employment discrimination.
There are situations in which a worker’s age is correlated with factors that may protect their job status, Button explained. For example, older workers tend to be employed longer, and some companies might have a “last in, first out” rule that guides how a downsizing program is implemented. Or they might be covered by a union contract that provides job security.
Older workers also tend to have more experience in their field, which may make employers reluctant to lay them off, said Joanna Lahey, an associate professor of economics at Texas A&M University and an expert on age discrimination.
Then, there are laws designed to protect older workers, like the Age Discrimination in Employment Act, or ADEA. Companies may be cautious simply because they don’t want to face lawsuits, Lahey noted.
Which is what IBM is facing. In addition to tagging older workers as the offspring of dinosaurs, executives there disparaged the company’s staff as its “dated maternal workforce.”
In its reporting, Bloomberg included a statement from an IBM spokesperson who said that the language used in the emails “is not consistent with the respect IBM has for its employees and as the facts clearly show, it does not reflect company practices or policies.”
Age-discrimination experts say that some companies may use mass layoffs as an excuse to fire older workers before bringing on younger ones — possibly to shrink salaries, among other reasons.
“I think, to some extent, mass layoff events are sometimes used as an excuse to purge the workforce,” said Button of Tulane.
But legally proving that may be difficult, said attorney Eric Bachman, who founded Bachman Law and deals with employment discrimination cases.
“It’s frankly very easy for a company to come up with some reason why it’s laying somebody off,” Bachman said.
You might be able to prove it in cases in which a company doesn’t actually eliminate a position, but lets a younger employee fill it, he said.
Or you might find a pretext for discrimination in a company’s claims that an older worker or their unit was underperforming, but the unit’s financial results, or the worker’s job performance, reveals otherwise, Bachman explained.
After being laid off, older workers face challenges getting a new job
When older workers are let go, said Lahey of Texas A&M, it’s a lot harder for them to get rehired. That’s also, inadvertently, because of the ADEA.
“If you are going to discriminate against older workers, it’s hard to get rid of them,” Lahey said. “And if it’s harder to get rid of them, you’re going to be more likely to not hire them in the first place.”
Lahey said hiring managers might also harbor certain biases toward older applicants, like assuming they aren’t up on current technology or that they’ll demand higher salaries.
Bachman said layoffs can impose lasting financial consequences on older workers.
“Not only do you get laid off, but now you’re faced with serious financial uncertainty because it’s going to be that much harder to find a new job,” he said.
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