A drunk man stumbles out of a bar late one night, forlornly looking for his lost car keys. Seeing a streetlamp, he searches under its light. When a helpful passerby asks him whether he lost his keys there, he slurs, “Probably not, but here is where the light is.”
The story is a metaphor for search. We tend to look where looking is easy, not necessarily where we may find the truth. It is a pitfall in academic research, but also in many walks of life. It also belongs to a class of bias in behavioral sciences, including behavioral economics.
One place where the drunkard’s search (sometimes called the ‘streetlight effect’) is most prominent is in the labor market. Employers search for workers where they think they will find them, not necessarily where they are. And, when it comes to older candidates—those over the age of 55—employers and their agents (e.g., headhunters and job search algorithms) are not merely intoxicated by passive bias. Academic work across countries confirms that employers explicitly discriminate against older candidates.
In what follows, we take a closer look at ageism in the workplace and why it matters.
First, ageism matters because it is pernicious. It is prejudice, akin to racial, gender, religious or ethnic discrimination. It is wrong. Discrimination of any kind, if tolerated, opens doors for even more insidious forms of prejudice.
Second, ageism has unwelcome macroeconomic impacts. It is well-known today that in the US there are roughly twice as many job openings (‘vacancies’) as there are candidates looking to fill them. If firms are unwilling to tap all viable sources of labor, shortages will push up wages and prices, contributing to inflation. Perceived shortages may also encourage hoarding of existing workers. When, as is now the case, economic activity slows, labor hoarding results in weak or even negative productivity growth, which increases per unit costs of output, further stoking inflation. And it squeezes corporate profits. Ageism, therefore, represents an inefficient allocation of resources.
Third, I bring my own experience and interest in the subject. I will soon be 64 years of age. And while I am happily self-employed, over the past few years I decided to test the job market and I searched for full-time positions. Despite historically low rates of unemployment and my applications to a wide-range of posted job openings, my active job search resulted in just a handful of job interviews. I wondered, was my experience an aberration?
Some readers may be puzzled by, or skeptical of, my claims of both ageism in hiring and the availability of older workers in the labor force. Let’s take a closer look at both topics, beginning in reverse order with the supply of older workers.
According to the Bureau of Labor Statistics (BLS) in its most recent US household survey, the number of individuals over the age of 55 (men and women) looking for work totaled 1.64 million in October 2022. That represents 31% of all Americans who the BLS defines as wanting a job last month. We are not a tiny minority.
Second, the over-55s have a growing desire to work, unlike many other groups in the labor force. For instance, according to BLS data, while the overall US labor force participation rate fell from 66.6% in October 1991 to 62.7% in February 2020 (on the eve of the pandemic), the over-55 participation rate rose over those same three decades from 29.4% to 40.3%. During the pandemic, of course, participation rates fell for most cohorts, but older workers were not statistically more likely to drop out of the workforce during Covid than others.
The basic point is this: The US population is growing older, and a greater fraction of that ageing population is willing to work. For firms frustrated by their inability to hire skilled workers, the data increasingly suggest that the missing keys are not going to be found under the old streetlamp.
Third, older workers have many desirable characteristics. As a percentage of workers who say they want to work, the over-55s are less likely to give up their search. In the latest BLS figures, for example, only 5% of the over-55s report wanting to work but have become discouraged, which is lower than for the overall working age population (7%) or than the prime age working population, those aged 24-54 (8%). At a time when job hopping and ‘quiet quitting’ are all the rage, the over 55s appear more resilient, more determined, and more committed to sticking it out than any other age group. Those traits are not captured by job search algorithms or human resources departments automatically binning CVs of those over a certain age.
Discrimination, plain and simple
So, if we are out there and more of us are willing to work, why aren’t we being hired? The answer, as much academic research supports, is discrimination. It is ugly, it is true, and it is ubiquitous.
For instance, in a recent National Bureau for Economic Research (NBER) working paper, David Neumark detailed some experiments he conducted on job interviewing and hiring practices. He examined hiring screening processes where candidates’ age is revealed at the application stage and found that job offer rates were significantly lower for older workers. He then studied cases where age information was withheld at the application stage but revealed at the interviewing stage. In the second sample, older applicants were not under-represented in interviews but received many fewer offers of employment. Neumark concluded that the best explanation for the results he found was age discrimination in hiring.
Similarly, a 2020 paper published in the European Sociological Review found that age-related discrimination is common in a survey of hiring practices across nine European countries. The authors tested whether ageism might be mitigated by better information about candidates’ skills and found, dismayingly, that it is not. To quote from the paper’s abstract: “…it does not matter whether recruiters have information that debunks or confirms ageist stereotypes; age is equally important in both situations.”
Similarly, a recent paper explored age discrimination in Italian hiring practices and confirmed the finding that even after accounting for factors that ought to matter, such as job training or experience, age bias remains important in one of the world’s most rapidly ageing societies. As the paper notes, the data show that age discrimination exists when competing job seekers have comparable employment characteristics. Research based on hiring practices in China—another rapidly ageing society—reveals similar age-discrimination results.
Even in Japan, one of the world’s most rapidly ageing societies with chronic labor shortages, age discrimination in hiring and retention are evident. Although 1996 legislation (toughened in 2007) attempts to bar age bias in the labor market, custom and practice are noted by observers as sources of continued discrimination. For some jobs, age limitations are permitted in recruiting. Japanese employers also hire disproportionately in the spring, which favors recent graduates. And although mandatory retirement ages have been lifted in Japan, it remains common for those over the age of 60 to receive reduced benefits from their employers. That may also partly explain why Japan has some of the highest elderly workforce participation rates in the world. Yet that outcome, too, reflects the flip side of ageism, namely the economic necessity of work due to age-related compensation discrimination.
Age discrimination in hiring and employment, in short, is universal. It is visible in cultures that seemingly value the elderly (Japan, China) and those that extoll the vigor and virtues of youth (America). It exists where job seekers are chronically scarce (Japan) and where demographics suggest that the rational decision would be to expand the labor pool by hiring more older workers (Italy or China). Ageism is not cultural, nor is it economically rational. It is not the figment of the imagination of the aggrieved. Rather, it is grounded in data unearthed by careful, peer-reviewed academic research.
Conclusion
So, what can be done to curb ageism in the workplace?
To begin, let’s have fewer shrill CEOs on CNBC, Bloomberg and social media complaining about job vacancies and firms being ‘forced’ to hike wages to attract or retain workers. While it is correct that even if every willing over-55 were hired the economy would still have many vacancies, it is equally important to highlight the fact that we are not there now. Rather, prejudice, implicit and explicit, has helped to create a larger-than-necessary artificial shortage of workers. That bias, and its downsides, resides squarely with employers.
Instead of complaining, employers need a better streetlamp. Hire more willing, skilled, and experienced workers. Only after that search has been exhausted is anyone entitled to complain about vacancies, labor shortages, and wage pressures.
Here’s a suggestion: Why not make it more difficult to determine the age of an applicant? Perhaps human resource departments and search firms should tell prospective applicants to remove all dates of work or education from their CVs. Maybe LinkedIn, Indeed.com and other job search platforms should remove required dates of employment and education tabs from their online job application forms. And perhaps employers should consider making first-round job interviews by telephone, rather than in person or via video links. Grey hair, baldness and wrinkles aren’t visible over the phone.
Here, too, I have some personal experience (and not just with grey hair or wrinkles). When I led a major division at a large international asset manager, I helped start the firm’s global diversity and inclusion (D&I) efforts. Among other items, our D&I team discussed changes to the firm’s hiring practices that would have required job applicants to remove their photograph from CVs (a common practice in several European countries) and even their names (to avoid potential discrimination based on name-based perceptions of race, ethnicity, or religious belief). Surely, if a stodgy asset manager could have that conversation, then other employers could consider asking applicants to remove dates from educational or work experience.
Finally, how about we all put a different kind of bulb in those old street lamps?
Attitudes about what is possible need to change. Ageism needs to go. There are 1.64 million Americans over the age of 55 out there, sleeves rolled up, rearing to go. Give us a try. I doubt you’ll regret what you did.
If you read this whole article, then I feel justified in this plug: if you are looking for an experienced (and age-less) macroeconomist, investment strategist, or multi-asset fund manager, please reach out to me at larry@jheconomics.com. Serious inquiries only.
