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06/05/2005

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I recently wrote about (1) preventing the elderly from driving (here) and (2) encouraging elderly Supreme Court justices to retire (

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Gabriel Mihalache

A question for Prof. Becker... related to age and retirement, do you think that you could write today a work of the magnitude of "The Economic Approach to Human Behavior"? And, depending on that answer, do you think that your best work is ahead or behind you? What are the retirement implications of one's future potential, at any one point? Excuse me, if this is a too personal approach.

Thank you!

Ira Friedman

The problem is the structure of the economy, which does not allow for full employment. There are not enough jobs to go around.

Nathan Kaufman

What do you think of recent trends in the natural rate of unemployment? (Is it trending downward? Why or why not?) How do people living and working longer figure into this?

TheWinfieldEffect

Couldn't we just solve the problem by making military service mandatory from age 18-22? Kids would go to high school until 18, be in the mlitary until at least 22, and be out of college at around 26. The average age of starting full-time employment would rise. Assuming Americans would still work around the same number of years, they'd retire later in life.

Larry

In answering this question, it helps to have been an employer.

My family business and factory had six employees (of 30)over the age of 80 when I took over, and my predecessor in charge was over 90. Had I separated them and one or more quickly died, I would have been his killer... To my credit, I did separate them all involuntarily, and collectively--to ease the pain--and none of them died for years afterward, (except my predecessor, who lasted barely three years). My feeling was the that the mission of the business was to make things, employ people, render services, show a profit and pay taxes. If I had allowed the oldsters to absorb all the profit, and the business to fail, or even just fail to grow, it would have served no one... We immediately put in a mandatory age 70 retirement policy, with no exceptions. Over the ensuing years some hit age 70 razor sharp and valuable to the firm, and some were nutty as fruitcakes. They all went. Another problem is that those who have been with you the longest have often received too many blanket wage increases, until they are collecting more salary than they are worth. That's a great argument against making blanket wage increases, and can be a strong argument in favor of a mandatory retirement age. It helps rationalize the business costs, and just about any business has elasticity in its payroll cost... This outlines the "competition" factor which, as Posner mentions, does not operate for judges and professors. If our universities were returned to 100% private entities, without endowments or tuition subsidies of any kind, it would work just fine for professors. (Just as most problems of health care would disappear if patients had to co-pay on every service). But it will never work for judges, and they should have a mandatory retirement age, especially federal judges, owing to their lifetime appointment.

aufnan

http://lessig.org/cgi-bin/mt/mt-tb.cgi/797
is it work ?

TheWinfieldEffect

Why don't we just link higher income tax rates to age? This would promote saving in the young and encourage older people to stop working.

RWS

Two points to add to the conversation:

1. Many people don't save during their prime earning years and then complain if they get fired for not being productive enough to justify their employment. The government should not reward that behavior by giving a right to sue--which usually forces a lucrative settlement, often up to $100,000, even if the ADEA claim is totally bogus. People should take some responsibility and research the company they want to work for to see how it operates, then plan their finances accordingly given some estimation of whether the employer will fire them before age 65. Some people will pick a company even though they know the employer is pretty harsh on low-producing older employees, because the company is highly productive and pays well. That should be fine, and you just save when you can instead of buying nice cars and houses and so on.

2. In my experience as a law clerk, a vast number of ADEA and other discrimination lawsuits arise from a victim mentality, in which the law seems to have cultivated an excuse in people who suffer adverse employment actions. Most get fired because they are unproductive, because most companies do not irrationally fire productive employees. However, when they get fired, it's easy to get in the mold of "I was fired because of my age (or because I have a limp or I look funny)" and avoid the real issue. It's a mental crutch, and the laws have created mass victim mentality. Most of these lawsuits around the country are dismissed for lack of any evidence or other defects. And, like I stated above, it is hardly uncommon for an employer to hand over up to six figures to a plaintiff, even if s/he is completely meritless, to make the expensive lawsuit go away.

Chas

I remember my sister writing an interesting essay 30 plus years ago about preparing for retirement for a schlorship competition which she won.
Her theory was that a person needed to be provided with time off gradually so that he/she could adjust to retirement. She didn't specify a mandatory retirement age, but theorized that if a person would be allowed to phase in days off doing whatever, volunteering, crafts, etc as a paid holiday every pay period over the last 3 years of working, that these workers would be better adjusted, easing into retirement by learning how to "retire". I feel that workers have problems with retirement, mentally, because it is so abrupt. So my sister's theory may be something to consider.

Palooka

First, the points on which I agree.

I agree with Becker that increased career length, for those capable and productive after traditional retirement, is something which should be encouraged.

I also agree with Posner that there is a particular problem in judges and professors, but I am puzzled why a post titled "Refusing to Retire: What Can Be Done When People Overstay Their Welcome?" only discusses a fraction of the population. I understand this is the population Posner finds himself most familiar, as he is both an academic and a judge, but why does the good judge recommend the "superior" system, that is a system with no age discrimination protection, when his examination of what the ADEA does is so inadequate? Does Posner mean that the ADEA should be repealed for professors only or for everybody based on his experience with professors and judges?

Posner wrote:

"Repealing the Age Discrimination in Employment Act would be a superior alternative to requiring tests of elderly professors, but is politically infeasible. And it would not deal with the problem of the elderly federal judges, because imposing a mandatory retirement age on them would require a constitutional amendment."

Becker wrote:

"The flexibility shown by the previous system is why I believe it is best to leave the determination of retirement ages to market forces rather than to the blunt instrument of legislation. Competition would create pressure for organizations to extend the employment of valuable employees who reached their "normal" retirement age. Actual ages of retirement did vary even among companies and other employers in the same industry, and certainly between industries and occupations. The system prior to the federal legislation on mandatory retirement was working well, and was adapting to the growing health and mental capacities of older persons. Posner agrees that it would be far better to eliminate this law than to introduce a competency test to evaluate whether professors and many others are capable of performing at a sufficiently high level."

There are two kinds of age discrimination which deserve distinction--discrimination post retirement age and discrimination pre retirement age. Both Becker and Posner seem most concerned with the ADEA when it comes to age discrimination post retirement (retirement being when eligible for SS benefits). I agree with their focus, but I am deeply troubled by the apparent endorsement of repealing the ADEA because of the problems associated with this particular group, those who continue to work past normal retirement age.

I believe the greater social concern rests with those who require employment even to subsist, but who are vulnerable in their 50s and 60s because of reduced productivity, increased medical coverage cost, etc. There is also the case of firing an individual to avoid the realization of pension benefits. Even though a firm's interests may be served by ridding their workforce of older workers, replacing them with cheaper, more efficient workers who are also cheaper to insure, there may be considerable governmental and social costs incurred as a result. It's entirely the total social cost is minimized, even though the firm's costs are not. It's also important to note that even assuming EQUAL productivity, it is in a firm's interest to discard their older workers because of the increased cost of insuring them. Do Becker and Posner suggest older workers who are equally productive have no protection because they cause a firm to incur increased costs?

The imperative of protecting the vulnerable, those workers who are without a social security "safety net," is of course not present in those workers who are eligible for social security benefits (currently those 62 or older, if I am correct). And in the case of the elite, the judges and the professors, I would not have a problem with mandatory retirement, even though some good professors and judges may be forced into retirement and society will not benefit from their considerable skill. But as Becker pointed out, for the exceptional case universities had found ways to keep productive faculty employed.

I realize the posts were addressing retirement, but both Becker and Posner (Posner more than Becker) seem to suggest that the whole of the ADEA should be repealed, not just mandatory retirement ages, so we could return to the "superior" system before the ADEA.

Corey: I read several of your comments, and I sympathesize with some of your sentiments. But I think you are wrong in your criticism that those here are advocating humans as "just a means to an end." The end is not something abstract, outside of human concern, as you imply. The end is the betterment of man through increased wealth and affluence. There is no better system in accomplishing that end than the capitalist system you so consistently rail against. I do agree, however, that in general on this blog, and in this discussion in particular, there has been a disturbing absence of concern for abstract human costs, though there is no reason those costs need be excluded from economic analysis or neglected on this blog.

Corey

"People should take some responsibility and research the company they want to work for to see how it operates"

Yeah! I mean, whenever I ask in interviews, "Are you really just a dishonest company that will let me work for 30 years and then fire me before I can collect my pension?"... well I learn so much about the company!

And that free national database of what companies will look like in 40 years after 10 management changes... its so helpful, I can't believe EVERYONE isn't using it for their research.

"In my experience as a law clerk, a vast number of ADEA and other discrimination lawsuits arise from a victim mentality"

In my experience as an engineer, law student, and human being, a vast number of people who speak of a "victim mentality" are over-privileged white males repeating soundbites in order to apologise for the more heartless aspects of capitalism.

Thats right RWS, people are just waiting to be fired so they can conspire with their evil leftist plaintiff's attorney to defraud hard-working MBAs of their profit-sharing. Because people are bad, and if you let them, the workers will act like the unwashed masses they are...

Why shouldn't an employer pay $100K for firing an older or minority worker? So what if they are actually just unproductive, why isn't it the fault of the hiring manager for not picking someone that would be productive. You say "don't feel sorry for the unemployed worker, they should research the company." Well, why feel sorry for the sued company? They should have researched the worker. Your rhetoric cuts both ways.

In actual fact neither side can predict the actions of the other reliably, you are simply reflecting a pro-corporate bias by siding with the employer, I am reflecting the opposite.

"That should be fine, and you just save when you can instead of buying nice cars and houses and so on."

That's right, only management gets the houses and cars! Else how will we be able to tell the difference between the people who are worth something and the peasants? That's why stuff costs so much, if it didn't, poor people wouldn't know they can't have it!

I don't know RWS, I think I prefer the victim mentality to the "blame the victim". Whatever floats your yacht I guess.

Corey

"The end is not something abstract, outside of human concern, as you imply. The end is the betterment of man through increased wealth and affluence."

Fine, but that statement assumes that man is bettered primarily through increased wealth and affluence.

Which seems obvious, but there are issues. What about wealth taken from other people. Certainly I am not better off if the economy grows but only the already-rich see the gain. Distribution is always a concern.

What about other ends that are outside or even conflict with wealth and affluence. Character, love, compassion, spirituality... economists get real uncomfortable talking about those ends.

It may be true that capitalism is the best system for increasing gross wealth. It is perhaps one of the worst systems for equitably distributing that wealth.

Regardless, it is nice to occasionally agree on something at least. :)

Palooka

Corey,

I think you're making an invalid assumption: That capitalism, because it causes inequality of wealth, is denying the poor of something. That is, it is making the poor worse off. But that needn't be true. In fact, I don't believe it is.

Let me give you two hypotheticals: One world where everybody is equal but poor, and another where everybody is better off but there is great inequality. Which one would you choose? Why does the presence of inequality somehow translate to the notion that the poor are being deprived of something?

I am only disturbed by some inequality--the inequality of medical care, for example, because I feel that underscores deeper values than mere materialistic greed (or if one is rich, guilt), which I believe is the source of most progressive hatred of inequality.

Aron Tannenbaum

Judge Posner:

Regarding a senior judge being "judged" by his/her peers: I would not like to see Supreme Court Justice Kennedy judged by the likes of Justice Antonin Scalia, for example or, more broadly, a senior moderate justice judged by a majority of partisan conservative justices.

As for professors, how would one overcome the old adage: "friends come and go, but enemies just accumulate"?

RWS

Corey, I reiterate the point that the vast majority of ADEA suits are dismissed at a stage prior to settlement or trial. As in, they are meritless fabrications of victimization that cost everyone money and create greater tension and lack of productivity in the workplace.

I could say all the things that I am privileged about and all of my significant handicaps, but that should be beyond the debate. Discuss things on the merits, not ad hominem. Suffice to say, though, that I am a better person for doing everything I can to discount the effect of my "handicaps" and never to attribute any failings to them, and to err on the side of challenging myself to do better instead of erring on the side of victimization. To the extent that you would prefer that people err on the other side, we disagree.

Also, let me note that investigating the company you work for in terms of reputation is very doable and should be expected. Foresight is never perfect, and for that reason, one should always diversify, save, and invest in oneself. That attitude is preferable to the alternative, in my view (for the same reasons).

Paul Gowder

RWS: people drop suits because they're too hard or too expensive to prove. Discrimination suits in general are often very difficult to win unless the employer has done something that highlights their motive in bold relief (i.e. saying something blatantly inappropriate). Failing that, a lot of cases where it smells a lot like age discrimination, but the employer hasn't admitted it, get dropped or lost based on difficulty of proof at the third stage of the McDonnell-Douglas framework (rebutting the pretext).

Just because something is hard to prove doesn't mean it's a meritless fabrication of victimization. Motive is always hard to prove, and reasonable people can disagree about whether or not someone was really fired because of their age.

RWS

Very good point, Paul. Sometimes, there may be discrimination that lacks real evidence. Generally, though, questions of motivation are for the jury. The way the case goes out on summary judgment may often be that the employer shows an uncontradicted failure in the employee's work product, which will then conclusively show that the employer had reason to institute the adverse employment action.

My experience working with these cases is that usually it's a case where the employer has more than ample evidence that the employee was not producing up to snuff, and the employee is trying to hang onto a pretty flimsy case because s/he won't admit that the work product was deficient. That is buttressed by the general fact that, as someone noted above, an employer is unlikely to fire someone who's adding good value and pulling his/her weight.

Also, the use of 401(k) retirement programs now and the quickly dying "guaranteed benefit" plans make this whole "firing the guy before he reaches 65 and avoiding the pension payout" a pretty rare bird. Those old guaranteed benefit plans were riddled with such problems. Now, there is a regular savings program, but once you retire, your retirement benefits vest immediately. Irrational age discrimination is just bad business, so it is a lot more rare than those who have been fired tend to believe. But, they can still force six-figure settlements by getting a plaintiff attorney who will be an even bigger pain to the employer who tries to fight the suit.

Corey

And again, why shouldn't the employer be forced to either prove a deficiency (worth overturning years of settled expectations of the worker) or pay a settlement?

In age discrimination cases, you have a person out on the street who is less marketable to other companies because of their advanced age. You want to presume there was no discimination and force the unemployed person to prove motive in court. I say presume there WAS discrimination and force the company to document poor performance that can convince a jury of reasonable people.

In deciding where to stick the presumption, you might consider which party will have the easiest and cheapest time demonstrating past performance. Well... who holds the records? Who has in-house counsel? hmmm...

"an employer is unlikely to fire someone who's adding good value and pulling his/her weight."

Oh come on, you are telling me that none of the 25,000 people GM is about to lay off are pulling their weight? Management made a decision to close plants based on some powerpoint that showed the stock price going up if they did so. Don't blame the worker for the decision to close the plant in her town. She may be employee of the month and they still aren't going to pay $75K to relocate her.

Last time I got laid off it was because a VP refigured the bogus market projections and decided to cancel the project I was on. We were so lean after 4 other layoffs that only good people were left. I had no chair when the music stopped, despite an excellent performance review one month before.

Their decision was "rational" because it saved them cost and increased the short term stock price. It intentionally had nothing to do with merit. Many HR departments would rather rely on contract law and "at will" employment agreements than attempt to tie layoffs to performance and defend themselves against discrimination torts in court.

Lets be realistic about why people lose their jobs in our economy. Of course the bad workers get hit first, but for every screw-up that gets fired I can dig up 5 good workers who simply suffer from being in a department that loses a political battle and gets characterized as "cost".

TheWinfieldEffect

COREY: "Many HR departments would rather rely on contract law and "at will" employment agreements than attempt to tie layoffs to performance and defend themselves against discrimination torts in court."

But hiring/firing "at-will" this makes sense for other reasons than merely the wish to discriminate unfettered. The 13th Amendment prohibits slavery, so you can't get specific performance on a work contract. The freedom to fire people allows you to contract in ways responsive to realtime fluctuations in the economy, rather than being bound to anachronistic terms that the employee can enforce, but the employer cannot because slavery is unconstitutional.

Corey

Why should the first thing that happens when a "fluctuation" occurs in the economy be that someone gets fired. Why shouldn't the first thing be a decrease in profits and dividends.

I worked for a company that laid off HALF its workforce while it had $1B cash in the bank, enough to pay everyone for 10 years even if revenue had dropped to zero (it had not).

We all know our system prioritizes the interests of managing shareholders over those of regular employees. The entire market system sets up a presumption for management profit interests. In an environment where companies are willing to do mass layoffs of good workers solely to hold up the stock price, what possible contract bargaining power does an individual worker have to obtain private anti-discrimination terms?

The answer is none, only collective power (unions or governments) can counter the favored power of CEOs and VPs, and if people here were honest they would admit that.

So yes, workers can leave any time, and employers can't stop them, so lassiez-faire would make everything cutely symmetrical on a theoretical plane that has nothing to do with reality. Of course the side with the presumption in its favor wants abstract symmetry, then all the apologist economists can talk about equality whilst management wins every conflict with labor.

Anonymous

Physical incapacity often reduces the amount of a person's working time, and if the person has a demanding job, the effect on his output can be great;

Yes and illness coupled with age is the greatest problem. Our chair is not much over 65, but her major topic of conversation is illness - operations, side effects, etc. For seven or eight years, she has (increasingly so, of course) not had the energy to guide our department or even to do ordinary administrative work in a timely nor efficient manner. It is true, our college grew very very fast and the administration expects far too much of chairs for far too litte extra pay. Our morale is unusually high because it rewards those who have paid their dues. But the problems that arise from a chair's increasing incapacity are beginning to outweigh those excuses & pluses.

Nessie

I should point out that Chinese deference to the elderly is at least partly explained in selfish terms. It was considerd auspicious to be associated with the long-lived, the thinking being that their longevity would rub off.

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Anonymous

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