The problem of age discrimination, which hurts older workers and reduces GDP, may have worsened during the COVID-19 pandemic. FG Trade/Getty Images
I've Always Wondered ...

How does age discrimination affect the economy?

Janet Nguyen Jun 3, 2021
The problem of age discrimination, which hurts older workers and reduces GDP, may have worsened during the COVID-19 pandemic. FG Trade/Getty Images

This is just one of the stories from our “I’ve Always Wondered” series, where we tackle all of your questions about the world of business, no matter how big or small. Ever wondered if recycling is worth it? Or how store brands stack up against name brands? Check out more from the series here.

Marketplace listener Kim S. Stewart asked:

How does age discrimination, over 50, affect the economy? And what corrections can be made from a policy perspective to assist with that?

Discriminating against older workers not only means they lose out on billions of dollars, but it can also result in lost GDP.

The advocacy group AARP released a study last year that found bias against workers age 50 and older reduced the nation’s gross domestic product by an estimated $850 billion in 2018. By 2050, the annual loss could amount to $3.9 trillion, according to the AARP.

The study also found that age discrimination may have led to $545 billion in forgone wages and salaries for older workers that year. 

Joanna Lahey, an expert on age discrimination and an associate professor of economics at Texas A&M University, said that generally, when people want to work but are unable to get a job or receive training, the result is lost economic productivity. 

One belief Lahey has heard is that older workers should leave the workforce to pave the way for younger workers. She called that a line of thinking that adheres to the “lump of labor fallacy” — the notion that increasing the number of workers will decrease the work available for everybody else. 

“You can have older workers in the economy and still have room for younger workers,” she said. 

Patrick Button, an assistant professor of economics at Tulane University, said older people who face discrimination tend to retire early, which leads to people drawing from Social Security earlier or applying for Social Security Disability Insurance. 

“Either way, it’s going to put pressure on the Social Security system,” Button said. “Because of population aging, there are more people withdrawing from Social Security than putting money into it.” 

He pointed out that the Social Security trust fund is projected to be depleted by 2035. 

When it comes to different fields, Button said certain industries can be more ageist than others.

“The tech industry is one that gets lambasted for having age discrimination,” he said, noting that some tech firms will put up job requirements favoring “technology natives,” which means they’re looking for younger workers. 

Lahey noted that age discrimination is different across gender and race. For white women, it starts as early as age 35, she said, while for white men, age 50 may be an “inflection point.”

For Black workers, age discrimination hits twice — when they enter the workforce and when they near retirement. 

Both Lahey and Button said our current laws don’t fully address intersectional discrimination. Button noted that the Age Discrimination in Employment Act of 1967 covers, of course, age, while Title VII of the 1964 Civil Rights Act prohibits discrimination on the basis of sex, race, ethnicity or nationality, among other characteristics. 

“Because sex and age are in different statutes, like different pieces of the law, that means that a lot of courts don’t allow you to bring forward an intersectional discrimination case,” Button said. “So if you say, ‘I faced intersectional discrimination for being older and female,’ which is very common, effectively the courts would say you have to pick one.” 

Button said some Supreme Court cases weakened the ADEA and raised the burden of proof that employees have to present. Policywise, to counteract bias, Button said there could be amendments to the act that undo some of these decisions and allow people to bring intersectional cases. 

One policy change Lahey suggested is that the federal Equal Employment Opportunity Commission could audit large companies and penalize those who discriminate based on age during hiring. 

The COVID-19 crisis has worsened economic conditions, with more than 82 million Americans filing for unemployment insurance since March 2020. The pandemic pushed 1.1 million older workers (those 55 and older) out of the workforce, according to a February report from the Schwartz Center for Economic Policy Analysis, part of the New School for Social Research.

That report listed its own policy recommendations, which include lowering the Medicare age to 50 and creating a bureau devoted to older workers, which could formulate policies that promote their welfare and improve their working conditions. 

Button said there’s a possibility that COVID-19 has increased age discrimination and may continue to do so because of the belief that older people, who are more vulnerable, shouldn’t be working during a pandemic. 

He also noted that age discrimination always worsens during recessions, when jobs are harder to come by.

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