Did the Age Discrimination Act of 1967 cause age discrimination?

I was curious about the phenomenon of age discrimination – where employers preferentially lay off older workers or refuse to hire older workers – so I decided to look up the statistics on Google’s Public Data Explorer website.

My initial hunch was that unemployment would be higher for workers over the age of 55 than for those in the 25-to-54 age category, particularly in technology related fields and in middle management positions, but I wanted to see by how much.

Below I have graphed the unemployment rate in the US for people over the age of 55 and those between 25 and 54.

 

(click image to enlarge)

Personally, I was surprised to see that the unemployment rate for older workers is actually lower than for younger ones. People who are retired or on permanent disability are not considered part of the workforce, so they are not counted in unemployment statistics. Nevertheless, older workers tend to make more money than younger ones, so in an economic downturn it might make sense to let them go first. (On the other hand, older workers tend to be more experienced, which is why they make more money in the first place.)

I was also surprised to see that in the 1950s and 1960s, the unemployment rate for both groups was essentially the same. It is only in the late 1960s that the two rates diverge, with older workers consistently having a lower unemployment rate, running as low as about two-thirds the rate of younger workers.

One possible reason for this, I suppose, is the growth of women in the workforce around this time period. Women tend to have a lower unemployment rate than men, so the inclusion of older women who had never worked before into the workforce might have brought down the unemployment rate among older people in general.

But before I got the chance to look into that idea further, I found out about the first big law to address this issue: the Age Discrimination in Employment Act of 1967.

This law was enacted at exactly the time that the unemployment rate of 55+ workers and the unemployment rate of younger workers begins to diverge. It makes me wonder if this law is pushing down the unemployment rate for older workers, or pushing it up for younger workers, or both. It also makes me wonder if the absence of a difference in unemployment rates prior to 1967 is “right” or if the presence of a difference after 1967 is “right”. I am not an economist, so I don’t know how to determine equilibrium unemployment rate as a function of age.

I guess my concern is: if there legitimately was age discrimination prior to 1967, it seems an odd coincidence that it exactly cancelled out the expected discrepancy in the youth-vs-seasoned workforce unemployment rate. And, if there was no serious age discrimination prior to 1967, then the age discrimination law seems to have created it, perhaps pushing up younger workers’ unemployment levels, pushing down older workers’ unemployment levels, or a combination of the two.

And, perhaps there also is some merit to the idea that the rise of women in workforce is influencing the statistics, but I have not yet had the chance to look at labor force participation rates by sex.

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