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06/12/2005

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Palooka

"Several comments suggest that there is a market failure in the employment of the elderly--that in the absence of legal protections, there would be rampant discrimination. I don't think that's likely. Employers want to minimize their quality-adjusted labor costs. An elderly person who is still productive should be able to retain his existing job or find a new one."

You have neglected several points I and others made. One, even EQUALLY productive older persons are disadvantaged because they are more costly to insure. If insurance were a minor expense, perhaps we could expect some price inelasticity, but insurance premiums paid by employers are HUGE costs of business. Second, if the ADEA were repealed, would it not be entirely legal to fire someone to avoid the realization of pension benefits? Would it not be entirely legal to fire a productive employee (in fact ALL of one's olders employees) because his or her insurance was too high.

Finally, I just don't see your conclusion that the ADEA be repealed being justified by your limited treatment of age discrimination in employment here. You take the least sympathetic cases--those of the elite (judges and professors), staying long past ordinary retirement, and then you use that as the crux for the argument that the ADEA should be repealed. I am astonished that Posner has decided to endorse such a knee-jerk libertarian solution without a fuller examination of the topic.

Corey

"I am astonished that Posner has decided to endorse such a knee-jerk libertarian solution without a fuller examination of the topic."

Its not as if Posner endorsing neo-liberal economics is a new thing. Perhaps this is merely a case where the required article of faith (that discrimination is "not likely" even if unregulated) just isn't plausible. Where more than just the usual dissenters find the assertion to be contrary to their experience and values.

Further examination would lead to the conclusion that, as you and I seem to agree, sometimes age discrimination is cost effective. Of course someone taking the libertarian ideology can't even recognize that line. It would mean that universal hostility among The People to age discrimination can only be tied to a moral/ethical value judgment, and once you admit the possibility of moral value judgments setting norms, you have defeated a core premise of L&E. (that "fairness has no content" or that "all costs are joint")

I guess I would say I am more disappointed than "astonished".

Paul Deignan

Lets consider some of the old high school tests from the 1800s. They asked very detailed and/or deep questions that few high school graduates today would be able to answer correctly. These measures of capacity were a product of the times. Today, computer proficiency--algorithms and data structures are more important than the ability to perform long division in one's head (or to have learned heuristics for the same sort of route problems).

Capacity is an agreed measure of competence, but what is the capacity that will be necessary for future development? The subject expert has some idea, but he may twist the power to define future job specifications for his job into a mechanism for ratifying his own methods (or lack thereof). We need an objective measure that recognizes performance as well as the promise of applying new methodologies to future challenges. The essence of the problem is insolvable. However, we are agreed that there is a basis that is proven.

Incrementally, we must extend this basis while also abstracting future requirements. Since we cannot predict the future success of a method (in the abstract), we are ultimately forced to explore as a society. Those jobs on the forefront of our evolution must then be tested by reality alone from which we distill the simple rule: "If it works, keep it. If it doesn't try someone or something different".

Does that sound radical? No. We are already doing it. Ergo, no problem and no need to institutionalize the fact that we are presently lagging. (If we did, we would always lag. Please note that this is a failure that we have examples of throughout time --- think of the army officer competency tests and the development of modern warfare. It is not just coincidence that the greatest military failures were inflicted by "untrained" or "foreign-thinking" adversaries. These failures were all well trained and well prepared for, even institutionalized--on the losing side).

Lets not institutionalize our future demise.
Instead, lets hold accountable those that we rely upon. Some competency tests are in order. Other would be measures of capacity are artifacts of societal ossification. We should have the wisdom now to discern what must be protected and what might be changed. (Or not--time will tell.)

Elton

If older workers become more expensive to employ because of greater health care costs, and the ADEA prevents employers from lowering their salaries correspondingly, then those older workers will be less attractive to employ. A law which "protects" a class of worker by making their employment conditions inflexible has the unintended consequence of making that class of worker more onerous to employ, and employers will avoid them. It is not necessary to be devoted to liberal economics to oppose this; it's only necessary to realize that labor inflexibilities will hurt BOTH the employers and the employees. Market forces can't just be blithely circumvented, but they can be distorted. Legislating against age-discrimination by preventing employers from factoring in the increased costs & declining productivity of older workers will just result in a different kind of discrimination, where older workers are eschewed entirely.

David Nieporent

What Elton said.

Also, firing someone to avoid paying them a pension to which they would otherwise be entitled would (likely, depending on circumstances) be an ERISA violation, independent of any ADEA issues.

RWS

One of the reasons for the major shift in retirement plans from fixed benefit pensions to fixed contribution 401(k) plans is to avoid this sort of problem, which hurts both employer and employee. The market has clearly acted to prefer the 401(k), because there is no real problem of an employer in a bilateral monopoly posture wanting to fire someone to avoid full pension vesting. You make what you earn per unit worked and put a portion of that into your savings plan, and it is yours, no questions asked. If you fail to produce at your salary level, your salary level is reduced or you are terminated, but that does not impact your retirement expectations with respect to the retirement package you have already earned.

It is a great example of the market working to solve this bilateral monopoly problem inherent in pension plan promises.

Bill

I'm glad that some are looking at this as a bilateral monopoly situation morphing into a monopsony situation as the aging employee, who has made firm specific investments to benefit the company, is less mobile by reason of age and the more specific investments it has made.

The perverse consequences of these proposals will be for employees to make less firm specific, and more industry specific and individual specific, investments absent a promise from the employer for longer employment and a pay out for the firm specific investment.

So, we get less firm specific investment, and more free agents.

I do think upper level managers are smart however, and with their pay (if they come in as a free agent) they also negotiate high severance and high retirement packages. Were it so simple for others.

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