Scrapping the retirement age: two analogies
Should firms be free to sack workers who are short or ugly? The answer is yes, if you support the CBI’s opposition to the government’s decision to scrap the default retirement age.The case for firms forcibly retiring 65-year-olds is that these tend to be less productive (pdf) than younger workers. But there’s also good evidence that shorter and uglier workers are less productive too. So, if firms are free to fire 65-year-olds, why shouldn’t they be free to fire stumpies and munters? You might reply that these are only slightly less productive than taller, prettier workers; that the differences are largely compensated for by lower wages; and that lots of short or ugly people are very productive.True. But exactly the same applies to older workers. The government’s decision to crack down on the sacking of older workers should, then, be welcomed on the grounds of consistency; there’s no strong reason to treat wrinkles differently from munters.However, just as there’s an inconsistency in the CBI’s argument, so too is there one in the government’s position.On the Today programme, John Humphrys suggested to Ed Davey that allowing older folk to work longer would deprive younger workers of job opportunities. Mr Davey replied:Older people and younger workers aren’t substitutes. They complement each other. If we have people working longer…that will result in a stimulus to the economy. I think that will lead to more jobs overall. I don’t buy this idea that there’s a fixed number of jobs in the economy.Good answer. But it is exactly the one used by opponents of a cap on immigration. We claim that immigrants are (with exceptions) complements, not substitutes (pdf), for many workers, and that they stimulate the economy.In fact, you can think of older workers joining the labour market as a form of immigration - people migrate from retirement into the labour market. Why is the government so relaxed about this form of migration, but not about migration from other countries into the labour market? (I know, Ed Davey is a Lib Dem and so opposed to immigration caps, but my point holds.)You could argue that older workers are, overall, less of a substitute for native younger workers than are immigrants. But again, we are entering the realm of very fine distinctions indeed, for which the empirical evidence is weak.So, could it be that both the government and CBI are being a little inconsistent?