Why Are Older Workers At Greater Risk of Displacement?

Abstract

The conventional wisdom says that older workers are less likely to be displaced than younger workers. While true in the past, the conventional wisdom is no longer true today; the advantage that older workers had has disappeared. This loss of relative job security is troubling. Once displaced, older workers are less likely to be reemployed, have less time to adjust their retirement plans, and are more likely to retire prematurely. Given the contraction of the nation’s retirement income system and rising longevity, these adverse effects make displacement increasingly injurious to older workers. This brief analyzes changes in the displacement of older and prime-age workers since the mid-1990s and the effect of three factors – tenure, educational attainment, and employment in manufacturing – identified as having a significant effect on displacement risk. The results show that all three factors contributed to the rising dislocation risk older workers face and their rising risk vis-à-vis prime-age workers. The brief proceeds as follows. The first section presents the three factors identified in the literature as affecting displacement. The second section reviews the data and methodology used to analyze the effects of these factors on the changing displacement risk of older and prime-age workers. The third section reports the findings, and the fourth section concludes.