Robert M. Hutchens, professor of labor economics at Cornell University, said, “The aggressive pushing out of older workers is a selective process.” He said employers favored keeping older employees who did not need supervision and worked extra to get the job done.
Some companies are eager to hire such workers. Tim Driver, chief executive of RetirementJobs.com, a Web site for job seekers over 50, said H&R Block, Safeway and Travelers were among them. “Because we’re in a service economy, not a manufacturing economy,” he said, “80 percent of jobs can be performed by people well into their years.”
Deborah Russell, director of work force issues for AARP, pointed to several factors that make older workers less attractive to retain or hire — many resist training, dislike answering to younger bosses or have poor computer skills.
Regina White, 68, of Geneva, Ill., a former special assistant to the vice president of taxes at Sears, Roebuck & Company, is searching for a position for the first time since she was downsized out of a job and retired in 1995. Her retirement portfolio has dropped 35 percent in value, and food and fuel prices have climbed. “I’ve had to change my lifestyle,” she said, noting that she quit her $70-a-month gym. She lives mainly on her annual $17,000 in Social Security payments and withdrawals from her retirement account.
“It’s degrading to look for work after you’ve stayed away from the work force as long as I have,” she said. “You’ve lost your skills. I’m not up to date on computers.”
When she applied recently for a mail-sorting job with United Parcel Service, she was mystified when the company hired several far younger applicants instead of her.
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“I’m being interviewed by kids who could be my grandchildren and competing with them,” she said.
Millions of workers are in Ms. White’s predicament because 401(k)’s have supplanted traditional pensions as the main retirement vehicle for America’s work force, even though many experts say there are huge problems with the 401(k) system. With traditional pensions, employers contribute the money and shoulder the risks; with 401(k)’s, workers are responsible for most or all of the contributions and all the investment risk.
More than one in five workers at companies that offer 401(k)’s do not even sign up. A study by the Congressional Research Service found that the median amount that workers age 55 to 64 have in their 401(k)’s is just $61,000; another study by the Employee Benefit Research Institute found that 43 percent of workers age 55 and over have less than $50,000 in their 401(k)’s and other savings and investments. Moreover, the institute found that 27 percent of workers in that age group invest more than 90 percent of their 401(k)’s in stocks, a comparatively volatile investment.
The law that established 401(k)’s was not designed to help the typical worker, but rather to help top executives shield part of their high income from taxes. But over the last two decades, companies have aggressively shifted from traditional pensions, which guarantee a particular amount each month, to 401(k)’s, largely because this shifts retirement costs from companies to employees.
When they lay off older workers, many employers insist they are focusing not on the workers’ age but on their lack of up-to-date skills or their lagging motivation. As the number of age discrimination lawsuits has swelled, there has been an increase in monetary judgments and settlements, and some employment experts predict bigger severance packages as a way to nudge out more older workers voluntarily.
Mr. VanDerhei, of the Employee Benefit Research Institute, said, “For the vast majority of people, if they think they have enough to get out of the work force at age 65, they’re fooling themselves.” More and more workers apparently agree, because the percentage of workers age 65 and over in the labor force has climbed to 17.3 percent in 2008, from 12 percent in 1999.
Debra Villacis, owner of an Internet company in St. Louis that handles documents for hospitals, appears to have reached that conclusion. Ms. Villacis, 59, said she had invested in growth stocks when she was younger and switched to stable, blue-chip holdings as she aged.
“Everything was pretty much on track,” she said. “But now everything’s been hit.”
She figures that her retirement portfolio has shrunk by $150,000, or 25 percent. Before the market sank, she was thinking of retiring in her 60s, but now, she said, “I’ll probably retire at 72 or so. It’s going to take a long time for the market to recover. After the Depression, it took 25 years for the stock market to get back.”
Even many younger workers are rethinking their retirement plans.