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Age segregation and hiring of older employees: low mobility revisited

Pekka Ilmakunnas (Department of Economics, Aalto University School of Business, Helsinki, Finland)
Seija Ilmakunnas (Labour Institute for Economic Research, Helsinki, Finland)

International Journal of Manpower

ISSN: 0143-7720

Article publication date: 28 October 2014

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Abstract

Purpose

The purpose of this paper is to analyse the determinants of hiring and exit rates by age at the firm level and firm-level age segregation in hirings and separations in Finland.

Design/methodology/approach

The use Finnish linked employer-employee data from 1990 to 2004. The authors present a decomposition of employment change by age group to disentangle the roles of hirings and exits from factors related to demographics effects. Firm-level analysis is conducted using regression models for the hiring rates and shares of different age groups and for the probability of hiring older employees. Similar models are estimated for the exits of older employees. Segregation is analysed using age segregation curves and Gini indices calculated from them.

Findings

The hirings of older (50+) employees have clearly been more segregated at the firm level than the exits or the stock of old employees. Larger firms are more likely to hire older employees, but their hiring rates are lower. However, the probability of having hires or exits of older workers are much higher in large firms. The results are relatively similar for men and women.

Research limitations/implications

The determinants of the probability of hiring older workers and the rate of hiring them, given that the rate is positive, are different and these two processes should be modelled separately. The Gini index of segregation may be misleading when the number of employees per firm is small. Therefore it is useful to compare segregation to a random reshuffle of employees to firms.

Practical implications

Older worker who have become unemployed or who want to change their job need to have more employment opportunities. Labour and pension policies need to be monitored and designed so that there are more incentives for the individual to search for a new job and for the firms to hire older employees.

Originality/value

The authors provide new empirical evidence of age segregation and hiring prospects of older employees. Age segregation has previously been examined in occupations, but the authors extend the analysis to firm-level segregation. The authors suggest a new decomposition of the rate of employment change to the hiring and exit rates and to a cohort effect.

Keywords

Acknowledgements

The authors are thankful to two referees for useful comments. Earlier versions of this paper was presented at the Applied Econometrics Association conference on Healthy Human Resources in Rome and at the Finnish Economic Association conference in Tampere.

Citation

Ilmakunnas, P. and Ilmakunnas, S. (2014), "Age segregation and hiring of older employees: low mobility revisited", International Journal of Manpower, Vol. 35 No. 8, pp. 1090-1115. https://doi.org/10.1108/IJM-04-2012-0060

Publisher

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Emerald Group Publishing Limited

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