The Age Discrimination Conundrum

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The Supreme Court has agreed to hear a case involving age discrimination that could have a profound effect on the way companies handle pensions, hiring, layoffs, and a huge number of labor contracts. This new case also involves a twist: the complaining group is not older workers, as you might expect, but middle-age workers who say they are being treated unfairly relative to older workers.

I’ll give you my conclusion up front: the terms of labor contracts should be negotiated between employees and employers, and only involve litigation in the event of a contract dispute. Otherwise, the government should have nothing to say about it. In short, the Age Discrimination in Employment Act (ADEA) of 1967 was an enormous error that creates insoluble legal problems, violates property rights, and interferes with freedom of choice.

The ADEA was passed in those years when the Executive and its Congress sought to right every alleged social wrong through legislation that presumed the courts could discern the core motivation behind every employment decision. If a certain politically fashionable group (whether women, blacks, seniors, or whomever) happened to be underrepresented in a particular firm, invidious motives were assumed to be behind the employer’s decision, with victimizers punished through coercive means and the victims compensated.

Like teenagers who forget to consider the long-term effects of their actions, politicians and regulators didn’t consider the implications its interventions would have on human decision making. In many cases, employers started to protect themselves against litigation by adopting “affirmative action” policies, even quotas, that favored hiring and promotion for some groups as against other groups. Of course, this ends up creating the appearance of a different form of discrimination, so-called reverse discrimination, as well as another class of potential plaintiffs (men, whites, middle-age workers, and other politically unfashionable groups).

On the other hand, employers became wary of the groups who were the intended beneficiaries, viewing them as walking lawsuits, and thus hiring just enough to meet the legal requirement but no more for fear of assuming too much in the way of legal liability. Employers have thus vacillated between giving special privileges to protected groups when necessary and eschewing them when possible.

The very instability of the situation seems to call forth ever more intervention. Employers started looking to courts rather than economics as critical players in labor markets, which is a bad way to run a business. The courts have systematically stepped away from attempting to discern the motivations for each labor contract to discover “disparate treatment” and instead sought to find evidence of “disparate impact.” Thus have the courts erected a hazy central plan — discerned only via the tea leaves of case precedent — for hiring and firing that is fraught with danger for all employers.

The case in question now involves General Dynamics, which in the 1990s faced a problem of exploding medical care prices (the reason businesses provide medical care coverage in the first place involves other government interventions, as does higher medical care costs, but those are stories for another time). In an effort to curb its soaring costs, it sought to somehow limit the amount retired workers could draw on. But because of federal law, it dared not limit benefits that its older workers would have on retirement. That would have landed the company in legal hot water. Instead, after 1997, it limited medical-care cuts to workers under the age of 50.

But wait! The ADEA does not say that companies must never discriminate against older workers. It says that employers may not discriminate on grounds of an “individual’s age.” (That employers are required to discriminate against workers under the age of 16 by refusing to hire is another consequence of another government intervention, but that is yet another story for another time.) Workers under the age of 50 at General Dynamics have noted this and complained that they are being subjected to age discrimination, or what is called reverse discrimination.

So, what would make these much-abused middle-age workers happy? One of two scenarios: either benefits must be expanded to everyone or must be cut for everyone. Think of the irony of the second scenario: an older worker gets his medical care slashed, and a younger worker sits back in satisfaction that at least the great goal of “equal treatment” has been achieved. The benefit here is entirely psychological in the sense that it feeds the desire of the envious for others to be hurt even without regard to whether the envious person is actually made better off.

How will the court come down on the question of whether or not this health-care policy constitutes illegal discrimination? There can be no question that it is discrimination. In fact, it is impossible to make any decisions in life without discriminating in some respect. We live in a world of scarcity. We must choose some things over others, which is all discrimination really means. We used to say that someone had a discriminating mind, and meant it in a flattering way! The question the court will address is whether it is legal or illegal discrimination.

On the face of it, it would appear to be illegal. The ADEA does indeed outlaw all forms of discrimination based on age, and the General Dynamics medical-care policy is clearly based on an age cut off. On the other hand, the court will also go beyond the wording of the law’s teeth to consider the intent of the legislation, which was clearly not to protect middle-age workers but rather only older workers. In fact, the ADEA includes a statement of purpose that refers to “older workers” who “find themselves disadvantaged.”

Complicating matters further is the fact that “older workers” and “middle-age workers” are not fixed categories (unlike race and sex). We were all young once and we will all get old, we hope, and it is ridiculous for courts to say that business must have no policies that address this reality, particularly with regard to medical care. (In terms of hiring, all else equal, it also makes sense for employers to hire younger workers, but that is yet another story for yet another time.) In short, there is no way that the court can solve this problem, any more than it can truly solve any other major litigation concerning discrimination. It all comes down to the arbitrary decisions of big shots in black robes.

Here we come to the crux of the matter. With all this anti-discrimination legislation, we have not really taken away the potential for people to be treated unfairly. What we have done is change the locus of decision-making from employers to courts, and thereby closed off market competition as a means of redressing unfairness. This was a huge error. In the market economy, employees have the option to shop around and walk away from labor contracts they do not like. But one cannot walk away from courts. The law sticks, even when it is wrong. Thus has the rivalrous process of market competition, which protects both employees and employers, and serves customers, been replaced by the power of judges, who victimize all. Courts can mandate equality but equality is not an idea to be pursued at the expense of freedom and property rights.

Llewellyn H. Rockwell, Jr. [send him mail] is president of the Ludwig von Mises Institute in Auburn, Alabama, and editor of LewRockwell.com.

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