Age Discrimination and Hiring of Older Workers. A definitive study by the Federal Reserve Bank of San Francisco

Age Discrimination and Hiring of Older Workers. A definitive study by the Federal Reserve Bank of San Francisco

David Neumark, Ian Burn, and Patrick Button

Population aging and the consequent increased financial burden on the U.S. Social Security system is driving new proposals for program reform. One major reform goal is to create stronger incentives for older individuals to stay in the workforce longer. However, hiring discrimination against older workers creates demand-side barriers that limit the effectiveness of these supply-side reforms. Evidence from a field experiment designed to test for hiring discrimination indicates that age discrimination makes it harder for older individuals, especially women, to get hired into new jobs.

In coming decades, the share of seniors age 65 and older in the U.S. working-age population is projected to rise sharply—from about 19% currently to 29% in the year 2060—approaching equality with the shares of those aged 25–44 and 45–64

Efforts to encourage people to work longer via supply-side reforms may be thwarted, however, by age discrimination in labor markets.

Age discrimination in hiring may be critical to whether older people can work substantially longer, because many seniors transition to part-time or shorter-term partial retirement or “bridge” jobs at the end of their careers

In this Economic Letter, we report on new evidence from a field experiment testing for discrimination in hiring against older workers near retirement age. The evidence points to such discrimination, particularly against older women.

A working definition of discrimination is when equally productive people are treated differently in the labor market—in this case, with respect to getting hired—simply because of their group membership, whether based on age, race, sex, etc.

To address these measurement challenges, social scientists have developed tests for hiring discrimination based on “audit” or “correspondence” studies.

Audit studies use actual applicants coached to act alike and measure job offers as the outcome. Correspondence studies create applicant profiles (on paper or electronically) and measure callbacks for job interviews, which past research indicates are predictive of differences in hiring rates.

Field experiment evidence on age discrimination

To garner evidence on the importance of age discrimination in hiring, in particular at ages near retirement where policymakers are trying to strengthen incentives to work longer, we carefully designed a correspondence study to overcome potential biases in past studies on age discrimination.

We created realistic but fictitious resumes for young (aged 29–31), middle-aged (aged 49–51), and older (aged 64–66) job applicants. Then we submitted these resumes to ads for job categories that employ large numbers of fairly low-skilled workers of all ages, and that do at least some hiring of both older and younger workers. 

We leveraged technology to conduct our study on a massive scale. In the end, we sent triplets of otherwise identical young, middle-aged, and older fictitious applications to over 13,000 positions in 12 cities spread across 11 states, totaling more than 40,000 applicants—by far the largest scale audit or correspondence study to date.

Overall, across all five sets of job applications, the callback rate was higher for younger applicants and lower for older applicants, consistent with age discrimination in hiring.

Relative to the young applicants, older female applicants for administrative jobs had a 47% lower callback rate, 7.6% versus 14.4%.

In sales, the difference was a bit smaller with a 36% lower callback rate—18.4% versus 28.7%. As well as being large, these gaps are also highly statistically significant.

For male job applicants—in sales, security, and janitor jobs—there is also a lower callback rate for older men in general. 

Overall, the results in Figure 2 indicate that women face worse age discrimination than men.

Our study contains a number of other analyses, but they coalesce around the same three messages.

1. First, there is evidence of age discrimination in hiring, for both women and men.
2. Second, while both middle-aged and older applicants experience discrimination relative to younger applicants, older applicants—those near the age of retirement—experience more age discrimination.
3. And third, women experience more age discrimination than men do. 

Conclusions:

Our field experiment provides compelling evidence that older workers experience age discrimination in hiring in the lower-skilled types of jobs the experiment covers.

This evidence implies that there are demand-side barriers to significantly extending work lives. Reducing these barriers would likely directly help boost employment of older workers to meet the challenges of population aging. 

• David Neumark is Chancellor’s Professor of economics and Director of the Economic Self-Sufficiency Policy Research Institute (ESSPRI) at the University of California, Irvine, and a visiting scholar at the Federal Reserve Bank of San Francisco.
• Ian Burn is a doctoral student in economics at the University of California, Irvine.
• Patrick Button is an assistant professor of economics at Tulane University.

References

• Deutsch, Francine M., Carla M. Zalenski, and Mary E. Clark. 1986. “Is There a Double Standard of Aging?” Journal of Applied Social Psychology 16, pp. 771–785.
• Figinski, Theodore, and David Neumark. 2016. “Does Eliminating the Earnings Test Increase the Incidence of Low Income Among Older Women?” Research on Aging (available online).
• Gornick, Janet C., Teresa Munzi, Eva Sierminska, and Timothy M. Smeeding. 2009. “Income, Assets, and Poverty: Older Women in Comparative Perspective.” Journal of Women, Politics & Policy 30, pp. 272–300.
• Heckman, James, and Peter Siegelman. 1993. “The Urban Institute Audit Studies: Their Methods and Findings.” In Clear and Convincing Evidence: Measurement of Discrimination in America, eds. Fix and Struyk. Washington, DC: The Urban Institute Press, pp. 187–258.
• Johnson, Richard W., Janette Kawachi, and Eric K. Lewis. 2009. Older Workers on the Move: Recareering in Later Life. Washington, DC: AARP Public Policy Institute.
• Martin, Patricia P., and David A. Weaver. 2005. “Social Security: A Program and Policy History.” Social Security Bulletin 66, pp. 1–15.
• Neumark, David, Ian Burn, and Patrick Button. 2016. “Is It Harder for Older Workers to Find Jobs? New and Improved Evidence from a Field Experiment.” NBER Working Paper 21669.
• Neumark, David, and Joanne Song. 2013. “Do Stronger Age Discrimination Laws Make Social Security Reforms More Effective?” Journal of Public Economics 108, pp. 1-16.
• U.S. Census Bureau. 2014. “2014 National Population Projections: Summary Tables, Table 3.”