Reverse-Ageism Might Be Worse

The Wall Street Journal reports that ageism has been turned on its head: younger workers are being laid off at higher rates than older workers. While reality TV producers might rejoice that their target audience has more time on its hands to enjoy their high quality programming, the U.S. economy should not.

From the article:

Employees in their 20s and 30s are finding themselves more at risk of a layoff, according to labor lawyers, as employers look to avoid age-discrimination lawsuits by adopting a "last one in, first one out" policy and turn to tenure as a means of conducting layoffs. In some cases, young, childless professionals say they feel they're being targeted in layoffs, while employees who have families to support are given special consideration.

That was certainly the case when I worked in financial services for most of 2008. 20- and 30-somethings were regularly sacked at greater proportions, despite being generally more productive than older employees and much less expensive due to smaller salaries. This behavior might be good for avoiding lawsuits, but it makes the big economic picture even uglier.

For starters, this trend will likely cause unemployment to be higher and last longer. Let's say a company hopes to save $300,000 in labor costs. They can either fire four workers making $75,000 or six workers making $50,000. Since younger workers tend to make less, it's easy to see that by targeting younger workers, you would have to lay more people off. Consequently, the nation's unemployment rate will be higher. It will also be harder for these younger workers to find new jobs, as the labor market will be flooded with less experienced workers all fighting for the few job slots they might be qualified for. That means high unemployment is also likely to last longer.

How about productivity? This depends on the assumption that younger workers are more productive. Some might dispute this, but that's certainly been my experience - and I would imagine younger workers having higher productivity would be even more pronounced in manufacturing jobs. With this assumption, the productivity of the nation on a whole will be lower than if older workers received more pink slips.

There may also be negative consequences for long-term growth. Will older workers spurn more growth and innovation? Maybe, but I think the safer bet is on younger, fresher minds. Moreover, leaving younger people in the workforce provides them with greater training and experience, which will also more favorably contribute to long-term growth.

But the news might not be all bad. If you fire people without families and mortgages, that might make the toll on society a little easier than the alternative. After all, they could always move back in with their parents who are 55 or older and still have a job. Unless, of course, their parents had a subprime mortgage.