This is a joint post from Christopher Brooks, Employment and Skills Policy Adviser, and Jose Iparraguirre, Chief Economist.
A worrying trend has recently emerged among the policy commentariat, which is taking aim at older workers and laying the blame for the high rates of youth unemployment at their door. Yes, the debate around ‘job blocking’ has emerged once again, in spite of academic and mainstream policy thinking having discredited this theory many, many years ago.
Every now and again the ‘job blocking’ argument manifests itself in policy. Most notably for our purposes, in 1970s Britain there was a predominant view that older workers directly ‘blocked’ younger workers from entering the workforce. The Government of the day introduced the Job Release Scheme in response, which incentivised early retirement on the basis that the unemployed youth would then move into the vacancies. The scheme ran for around a decade before ending as a total and spectacular failure – not only had the scheme failed to improve youth unemployment, but it had proven that if anything there was a direct correlation between high employment rates among older workers and high employment rates among younger workers.
Since then, thankfully, thinking among governments and policy makers has moved on, and the real relationship and causes – that the labour market is highly flexible, and that there is precious little competition for jobs between young and older seekers – have been recognised.
But every now and again the original theory rears its ugly head. Indeed, it is so well-known that economists have even coined a term for it: the ‘lump-of-labour’ fallacy. For some background, this theory has been around since the 19th century, and it seems to die hard (according to Nobel-prize winning economist Paul Krugman, it tends to bounce back whenever the economy contracts).
Firstly, what it is all about? During this current contraction of economic activity employment levels among older people have been going up whereas the number of younger people in employment has been falling. This is true both for men and women (especially above state pension age).