Is there a war between the generations in the working world? You might think so from looking at recent data. In many high-income countries, the pay gap between the old and the young has widened. The share of younger workers feeling actively engaged at work has fallen. And a new paper titled “Countries for Old Men” argues that “as older workers enjoy more successful careers, younger workers become less likely to hold higher-ranked jobs and fall toward the bottom of the wage distribution.”
But I want to push back on the seemingly obvious conclusion, which is that older workers (OK, I am one) need to step aside and make room.
I’ll start with the problem. In 2019, a USA Today/LinkedIn survey found that 42 percent of Gen Zers and 41 percent of millennials said they’d had difficulty moving up in their careers because boomers were putting off retirement.
More recently, according to Gallup, there has been a realignment of the generations in engagement at work. The engagement of boomers rose slightly from 2020 through 2023, while the engagement of the younger three age cohorts fell, as the table below shows.
Workers over 55 have always earned more on average than those under 35, but the gap in the United States grew by 61 percent between 1979 and 2018, according to Nicola Bianchi of Northwestern University’s Kellogg School of Management and Matteo Paradisi of the Einaudi Institute for Economics and Finance in Rome, who cowrote the “Countries for Old Men” paper.
Now, to explain why things may not be as bad as these data points seem to indicate. For starters, the USA Today/LinkedIn survey is about impressions, not data. It’s not surprising that a lot of young people (though a minority) would partly blame boomers for their own failure to advance. Whether or not it’s true is a separate question.
The recent drop-off in the engagement of younger millennials and Gen Zers probably has more to do with aftereffects of the pandemic than with boomers clogging the employment pipeline. If anything, the pipeline has become less clogged because a lot of older workers dropped out of the labor force when Covid hit.
In fact, the engagement of young workers may have declined because the work-from-home shift has had a negative impact on their careers in particular. They need face time in the office to develop relationships with their peers and bosses and to pick up institutional knowledge. “Physical distance can sometimes become mental distance if it’s not managed right,” Jim Harter, the chief scientist for workplace management and well-being at Gallup, told me.
On the other hand, the widening of the pay gap is real. Bianchi and Paradisi found that older workers really are taking a bigger share of the higher-ranking — that is, higher-paying — jobs than they took in the past. That’s a genuine problem for the young.
But does that mean it’s time for the gray-haired ones to go play golf? Not necessarily, Bianchi said in an interview. Working keeps older people healthy, he said. And employers would be at a loss if older workers retired en masse, taking with them their accumulated knowledge, he added. “Firms are very happy to be paying them.”
The problem of stunted careers is biggest at slow-growing companies and places with narrow career silos, Teresa Ghilarducci, an economist at the New School for Social Research, told me. In Silicon Valley and Austin, Texas, two tech hotbeds, older workers aren’t earning more than younger ones, she found.
Academia is a good example of an industry with narrow career silos. “I’m a living example of somebody who’s probably blocking promotions for some 26-year-old economist,” Steven Allen, an economist at North Carolina State University, told me. He is 72.
Moving to faster-growing companies would help individual young people get ahead, but it’s not a solution for young people in general, since there are a limited number of fast-growing companies.
Mentorships that match older and younger workers and forming teams that include people of all ages are good ways to uplift the young and recognize the contributions of the old, Dawn Fay, an operational president for the talent firm Robert Half, told me.
Another solution is to improve pensions so older people can retire when they want, said Ghilarducci. (I wrote about her book on the difficulties of retiring, “Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy,” this year.)
Mandatory retirement, another option, is a “draconian” solution, Bianchi said. He might support it for the public sector, where pay tends to be a function of seniority, but not for the private sector, where pay tends to track productivity more closely.
“Right now I couldn’t tell you this is the way to go,” he said. “It’s incredibly complex. It’s not something we’re really discussing as much as we should, in our opinion.”
I agree.
Elsewhere: Paying the Mortgage in Retirement
Just over half of homeowners who entered retirement in recent years had mortgage debt, up from about 38 percent about 25 years earlier, and the median balance on those loans roughly doubled, even after accounting for inflation, to roughly $109,000 in 2022 dollars, according to a study by Leora Friedberg of the University of Virginia, Wei Sun of Renmin University of China and Anthony Webb of the New School for Social Research.
Holding constant demographic characteristics and home value, “households with larger mortgages hold less financial assets, retire later, experience greater declines in consumption during retirement, and sell their houses earlier as they age,” the authors wrote in their article, which came out last year.
Quote of the Day
“China’s trading partners are unlikely to tolerate sustained further expansion in the goods trade surplus, which already stands at 0.8 percent of global G.D.P. (one of the highest in world economic history).”
— Jan Hatzius, the chief economist of Goldman Sachs (Sept. 12)
The post For Younger Workers to Get Ahead, Do Boomers Just Need to Retire? appeared first on New York Times.
