The Pew Economic Mobility Project on the Lump-of-Labor Fallacy

by Reihan Salam

Are younger workers harmed when older workers delay retirement? The Pew Economic Mobility Project argues that this is not the case:

Varied methodological approaches found no evidence to support the lump-of-labor theory in the United States. In fact, the evidence suggests that greater employment of older persons leads to better outcomes for the young—reduced unemployment, increased employment, and a higher wage. The patterns are consistent for both men and women and for groups with different levels of education. And perhaps most notably, the effects of Boomer employment on other segments of the labor market during the Great Recession do not differ from those during typical business cycles.

There are other benefits from delayed retirement as well. Consider the following from Kent Smetters of Wharton, as quoted in a Knowledge@Wharton article from December of 2010:


The good news is that working later into life helps people retain their cognitive abilities. “The usual belief in gerontology is that if you retire your mind, you die,” says Smetters. In a study last spring, researchers at Rand Corp. and the University of Michigan found that men and women in countries where people work longer did better on a test of cognitive skills involving memory than those in countries where early retirement was the norm. The performance gap was widest between countries like the United States, where about half those aged 60 to 64 continue to work, and France, where just one-sixth of the members of that age group are in the workforce. “Retirement has a strong effect on cognition,” says Susan Rohwedder, associate director of the RAND Center for the Study of Aging and coauthor of the paper. “People who continue to work retain their cognitive ability longer.”

There are other considerations, however:

The flip side is that working longer can be hard on people in physically demanding jobs such as those that require crouching or lifting heavy objects, or jobs in cramped workspaces or harsh working environments. Some 8.5 million U.S. workers aged 58 and over hold such jobs, according to a study by the Center for Economic and Policy Research, which promotes debate on economic issues. “Even if these workers were to move to jobs that were less physically demanding, they are more likely to face age discrimination and shortcomings in job training,” says study author Hye Jin Rho.

My sense is that the number of older workers in physically demanding jobs will decline over time, but this is not to be taken lightly.