Are older workers getting in the way of the young?

Fri Jan 6, 2012 2:02pm EST
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By Mark Miller

(Reuters) - Today's report on unemployment shows that the economy continues to gather steam - payrolls grew by 200,000 and the jobless rate ticked downward again, to 8.5 percent.

But young Americans are having a much tougher time finding work than older workers. The seasonally-adjusted jobless rate for workers over age 55 stood at 6.2 percent last month, compared with 9.4 percent for workers age 25 to 34.

And the overall workforce is getting more gray. Labor force participation by workers over age 55 has risen 11 percent since December 2007, and is projected to go higher as baby boomers try to restore retirement security by staying on the job longer. For example, 15 percent of Americans tell the Employee Benefit Research Institute they expect to work until age 70, up from 11 percent as recently as 2006.

All of which begs the question: In an economy where 20 million Americans are still out of work or underemployed, are older workers hurting the young by refusing to get out of the way? News stories on unemployment often say that they are - and intuition might tell you that's so.

But any mainstream economist will tell you that's just not how labor markets work.

"Many people who aren't economists think there is only a finite amount of work to do," says Jeffrey Zax, a professor at the University of Colorado who specializes in labor economics. "No one within the field of economics believes that, but it's a perpetual myth that we've never succeeded in killing as we would like to."

"Work comes from the ability to do something useful, and there is no fixed limit on how many useful things can be done," he adds. "History shows we are always thinking of new things to do that are useful. So what determines how much work is possible is how much useful work there is to do."

Economists call this the lump sum of labor fallacy. It stems from understandable gut-level fears and insecurities we all feel. And it's no different than fears sparked by the growth of other demographic groups in the labor force over time, such as women or immigrants.   Continued...