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Mandatory retirement: the golden age of unemployment

Stereotypical ideas about the aged and their ability to work are wrong. Studies show that older workers are less likely to quit, produce better work, are more flexible, and are more satisfied with their jobs than younger employees.

AMERICANS tend to have a romantic vision of retirement as a "golden age," a time when a couple can enjoy the independence and security earned through long years of work and economy. But that vision has been defaced by the hard facts of life for millions of older persons who live below the poverty line and are isolated and ignored in a work-oriented society.

It is also true that many Americans have a dim view of older workers. The older worker is stereotyped as inefficient and unproductive. There is fear that young people will be barred from the work force because they can't dislodge their elders at the top of seniority lists. All too often it is taken for granted that the old must move on so the young can move up.

That bleak view of things serves as a rationale for job discrimination against older persons. But it is just as inaccurate as the notion of the golden retirement years. Studies have shown older workers to be productive and dependable, and experts suggest that the trend towards a higher proportion of older people in the U.S. population will create a demand for older workers.

Clearly, both the needs of our older citizens and the changing age structure of our population require a new look at age discrimination in employment, particularly mandatory retirement. National attention to these problems recently culminated when Congress passed the Age Discrimination in Employment Act amendments of 1978, which will raise the mandatory retirement age to 70 for most persons. In Illinois, Rep. Alan J. Greiman (D., Skokie) has introduced legislation during the last three general assemblies that would outlaw compulsory retirement at any age. This time H.B. 65, sponsored by Rep. Greiman and Sen. Howard W. Carroll (D., Skokie), passed the House but was voted down in the Senate 19-32.

Older persons constitute one of the most economically disadvantaged segments of society. The 1970 census showed that about one-fourth of Illinois' 1.1 million persons aged 65 and over were in poverty, and families headed by an older person had average incomes of less than half that of other families. Recent data suggest some improvement in these economic circumstances, but many older persons continue to live in or near poverty.

Employment plays a critical role in determining the economic well-being of the elderly. Census data show that 57.6 percent of the incomes of all families headed by an older person was earned through employment, as compared to only 11.1 percent for low-income families headed by an older person (see charts). These low-income families must rely heavily on Social Security benefits, which alone are insufficient to keep them out of poverty.

Employment is also importantfor psychological reasons. This is underscored by a recent study which found that work satisfaction was among the strongest indicators of how long an older person will live. Largely because of the decline of the extended family, a person's self-esteem is becoming increasingly based on employment, as is the ability to relate to others and to maintain meaningful roles in society. Retirement often causes severe problems in social adjustment, and forced retirement can contribute to feelings of rejection and worthlessness.

Many older persons want or need to work, but the percentage of older people participating in the work force (holding a job or hunting for one) has declined

September 1979 / Illinois Issues / 07

from 27 percent in 1947 to 14 percent in 1975. Work force participation among older men has decreased still more sharply. The exodus of older men from the work force can be partially attributed to voluntary retirement made possible by increased Social Security and private pension benefits. But mandatory retirement policies and other age discrimination practices have also removed many older persons from the work force involuntarily. Forty-one percent of retired men and 32 percent of retired women in a 1975 Harris Survey said that they had not retired by choice; a sizable number of these persons would probably continue working if they were allowed to. One Social Security Administration study found, for instance, that about half of the men who had been forced to retire indicated a year later they would like to return to work.

Job prospects for an older person are generally dismal. Unemployed persons aged 55 and over have the longest durations of unemployment of any age group, and many become so discouraged that they give up looking for work. The U.S. Department of Labor (DOL) estimated in 1975 that over one-half of all such "discouraged workers" were over 45 and over one-third were over 55. This is not surprising, considering DOL findings on the extent of age discrimination. One study showed, for example, that about one-fourth of all private sector job openings were closed to persons aged 45 and over, and about one-half were closed to those aged 55 and over.

The roots of age discrimination in employment in the U.S. can be traced to the movement from an agricultural to a factory-based economy in the late 19th century. Ironically, however, the factor most responsible for the emergence and growth of age discrimination was the passage of the Social Security Act in 1935. Although Social Security was not intended to reflect unfavorably on the capabilities of older persons, it served to institutionalize 65 as the age at which people are viewed as being old. Unfavorable myths regarding older workers soon arose, so that it bacame increasingly difficult for them to maintain or find employment. The growth of public and private pension plans with mandatory retirement ages reinforced the trend.

The gradual aging of the U.S. population and the increase in life expectancy after age 65 have severely aggravated the impact of age discrimination in employment. The percentage of the population which is 65 and over has risen from 6.8 percent in 1940 to about 10 percent today, and the life expectancy after reaching age 65 has increased from 5 to 13 years. As a result, older persons today have a much longer period over which they must spread retirement income. This, combined with high inflation rates, increases their need for employment.

Efficiency and 'new blood'

The growth of a nonworking older population also has other ramifications. Since 1940, the number of wage earners for every Social Security beneficiary has shrunk from 35 to 3.2, leading to tremendous Social Security tax increases for the working population. Many analysts now recommend that Social Security and other retirement policies be restructured to create economic incentives for older persons to work. Such incentives would help the elderly increase their incomes and would also shore up the Social Security system. But there is another reason for work incentives. Predictions suggest that far from being an unwanted surplus on the employment market, older workers will be needed in the next 7 to 10 years just to maintain our current labor force.

Despite the growing impact of discriminatory policies on older persons and society, employers generally have not voluntarily eliminated or eased such practices. The principal reasons employers continue to engage in age discrimination involve concerns with worker productivity or desires to manage the work force of a company as efficiently as possible. One DOL employer survey found, for example, that the lack of physical capabilities was the most common reason given for failure to hire older persons. This is unfortunate because numerous studies have shown that older workers produce higher quality work, are less likely to quit their jobs, are more flexible, are more satisfied with their work and are

September 1979 / Illinois Issues / 08

psychologically healthier than younger workers. Only for jobs requiring hard physical labor does there appear to be any credence to concerns with the capabilities of older workers.

Many employers argue that their businesses could not be run as efficiently without mandatory retirement policies. They contend that it is difficult to objectively measure the performance of older workers, and mandatory retirement policies give them an easy mechanism to weed out incompetent employees. But critics counter that measuring capabilities and performance is difficult for all age groups and that standards for younger workers should be applicable to their elders as well. They also note that many companies are operating successfully without mandatory retirement policies.

Some employers argue that mandatory retirement allows them to plan their employment needs more accurately, since they can predict when key job openings will occur. Eliminating mandatory retirement, they say, would block the entrance of some workers into the work force and limit the upward mobility of others, thus restricting the regular and planned arrival of "new blood" in the organization. Critics concede that eliminating mandatory retirement could defer the upward mobility of some younger workers, but they also point out that the employers' real interest may be to cut costs by replacing high salaried older employees with lower salaried younger persons. In any case, the elimination of mandatory retirement probably would not seriously restrict the entrance of younger persons into the labor force because other factors are generally agreed to be more important in determining employment opportunities.

September 1979 / Illinois Issues / 09

The primary protection against age discrimination in employment is the federal Age Discrimination in Employment Act of 1967 (ADEA), which was recently amended by the Age Discrimination in Employment Act Amendments of 1978. ADEA prohibits private employers of 20 or more persons and all government employers from using age as the sole basis for discharging, refusing to hire, or in any other way discriminating against employees or prospective employees. Labor organizations and employment agencies are also covered. The law also makes it illegal for employment advertisements to indicate that age will have a bearing on whether a job applicant is considered. Until passage of the 1978 amendments, however, all of these protections were offered only to persons aged 40 to 65.

The wage and hour division of the U.S. Department of Labor has enforced ADEA for all but federal government employees, who have been protected by the U.S. Civil Service Commission. Covered individuals may file complaints at DOL offices, whose staff then investigates each complaint. If investigators find that the law has been violated, they try to get the employer, employment agency or labor organization to remedy the violation.

About 90 percent of all ADEA violations are resolved by voluntary agreements which may result in individuals being hired, rehired, promoted, reimbursed for back wages or granted damage payments. However, if agreement cannot be reached, DOL may file suit against the alleged violator in federal court for remediation of the complaint and payment of damages. Individuals may also file suits, but only if DOL decides not to file in their behalf.

Funding to enforce ADEA is limited. On an annual budget of about $2 million, DOL has been investigating an average of 7,000 cases a year. The department estimates that between 1972 and 1976, it removed age restrictions from 185,000 jobs and obtained $8.7 million in payments to some 2,500 older persons who had been discriminated against.

However, because of two major limitations in the law's coverage, ADEA had practically no impact on mandatory retirement policies until passage of the 1978 amendments. The most serious limitation was the restriction in coverage to persons aged 40 to 65, which, in effect, gave tacit federal approval to discriminatory employment practices against persons over 65. A second limitation was a provision exempting employers with "bona fide pension plans." This allowed employers having pension plans with a specified retirement age to force employees to retire prior to age 65.

Federal and state

The 1978 amendments, which with a few exceptions became effective in January 1979, broadened coverage considerably. They eliminated the upper age limit for coverage of federal employees and raised it from 65 to 70 for all other employees. In addition, the amendments make it unlawful for pension plans to be used to force covered employees to retire. As a result, it is now illegal to force most employees to retire before age 70, and mandatory retirement for federal employees has been completely eliminated. Legislation to remove the upper age limit for all covered employees will probably soon be introduced in Congress.

Will the new amendments be effective in eliminating mandatory retirement Tor those under 70? That depends on how the law is enforced. Backlogs in age discrimination cases were mounting up in most DOL offices even before the amendments were passed, so substantial funding increases will be needed to prevent further delays and achieve effective enforcement. Initial efforts to implement the amendments may also be slowed down by the transfer of ADEA enforcement responsibilities from DOL to the Equal Opportunities Commission in July 1979.

Since 1967, Illinois has had a law on the books prohibiting employment discrimination against persons aged 45 and over, but the law contained only minimal penalties and no provisions for enforcement. Strong state legislation is important because of the shortage of funds for the federal ADEA and the current case backlog. H.B. 65, which came closer to passage this session than it has in the past, would have put some teeth in the law. The bill would amend the Fair Employment Practices Act to prohibit employment discrimination because of age and would outla.w mandatory retirement at any age for most employees. The fair employment act is administered by the Fair Employment Practices Commission, which can order that individuals be hired, rehired, reimbursed for back wages or granted monetary damages. If H.B. 65 had passed -- and if adequate funding were provided for enforcement -- Illinois would have had one of the toughest age discrimination statutes in the nation. Businesses and business organizations have generally opposed the stronger legislation which has been supported by the state chapter of the AFL-CIO, the Illinois Department on Aging and other advocates for the rights of older persons (see box on pages 8 and 9).

In spite of the defeat of H.B. 65, both the federal amendments and the attempts to strengthen the Illinois law signal a shift in the trend toward retirement at earlier and earlier ages. In the future, we are likely to see not only the complete elimination of mandatory retirement, but also incentives to encourage older persons to remain in the work force. The effects of these changes will be watched with interest and concern, as they will likely affect not only the well-being of our older population but also the Social Security system and the economy in general.

Steve Anderson is a research associate, and Robert A. Weagant is associate dean and professor at the Jane Addams College of Social Work, University of Illinois at Chicago Circle. They are coauthors of the recent report, Age Discrimination in Employment: A Review of Federal and State Legislation and Enforcement, which was completed under a grant from the Illinois Department on Aging.

September 1979 / Illinois Issues / 10

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