Fundamento de la Indemnidad o Intangibilidad

Individuals’ earnings typically increase over their working lives, independent of growth and wage trends in the economy (CED, 1999). One explanation is that higher pay may reflect higher productivity because mature workers are more experienced. Alternatively, mature workers may be paid above their level of productivity because earlier in their working lives they were underpaid relative to their productivity with the understanding that their pay will increase steadily over time and rise above productivity late in their careers (Lazear, 1979; Hutchens, 1986).

This point only appears to hold for those who have remained in secure employment because Chan and Stevens (2001) show that involuntary job loss and subsequent re- employment comes at great economic cost for mature workers. Instead of retaining current income levels or increasing their income they lose substantial amounts of earnings and rarely return to anything like what they earned previously. What is more damaging is that it is in the last ten years of paid employment where workers can truly fund their retirement (Mitchell & Moore, 1998). The human capital explanation for this dramatic loss in income is that the firm specific skills that a mature worker brings to their new employer have little economic value (Becker, 1993).

For those who remain in employment Kotlikoff and Gokhale (1992) show that over a 15 year period compensation was below productivity early on in an employee’s career but exceeded productivity later for those who remained. Regardless, mature workers who are paid on the basis of their seniority rather than their productive contribution have made themselves an easy target for cost-cutting and created a greater reluctance for hiring mature workers (Hutchens, 1986). Hutchens (1986) takes the notion of reluctance to hire mature workers further with his argument that employers while happy to have mature workers in their employ would not employ them because their first inclination is to hire younger workers from whom they can recoup the fixed costs of hiring and training more readily. On top of this Lazear (1979) suggests that younger workers enter an implicit contract where they are under-paid to stop them shirking and so reap the rewards of overpayment relative to their productivity later on.

The threat of lower labour productivity due to an aging workforce has already been expressed and possibly accepted as fact (New Zealand Institute of Economic Research, 2002) by the economic community at a microeconomic level, even though there is little actual agreement on this point (Johnson & Neumark, 1997; Stephenson & Scobie, 2002). At the firm and individual level there is more support to suggest that while aging reduces cognitive speed and other physical capabilities these are more than made up for in terms of experience (Griffiths, 1997).

The greater barriers that mature workers face is that there are many institutional features in labour markets around the world, aside from earnings, that make it more expensive to hire mature workers. For example in the United States employers are provided with real incentives not to hire mature workers. Firms that provided health insurance coverage to their employees are less likely to hire mature workers than firms with no health coverage as men over the age of 50 cost twice as much as men under the age of 50 (Scott, Berger, & Garen, 1995).

Mature working Americans however have lower health costs than non-working mature Americans. Before 1982 the United States government provided health insurance for everyone over 65, whether or not employed. Now if a worker is covered by employer health insurance at age 65 the employer is required to continue coverage for the length of

employment. As a result of this change mature workers have become more expensive to employers (CED, 1999).

Again in the United States there appear to be real disincentives to hiring mature workers with regard to pension plans because many of the plans are structured in a way that makes employing a mature worker more expensive in pension contributions than hiring a comparably qualified younger worker. In particular Garen Berger and Scott (1996) note that pension regulatory requirements appear to discourage the employment of mature workers in general, but especially affect low wage, entry-level workers, whose earning cannot be reduced enough to offset expensive pension benefits. There is a problem particularly with defined benefit pension plans where employers are less likely to hire mature workers than firms that do not offer such plans (Garen et al. 1996).

The costs associated with work injury and disability is also higher for mature workers. Although the incidence of injury is lower, mature workers are more likely to suffer permanent disabilities and fatalities. Absenteeism is slightly higher for mature workers than for younger ones. For mature workers, absences from work are more often due to illness or injury than to personal and family obligations. Also, like workplace injuries, absences tend to be longer for mature than for younger workers (CED, 1999).

The result of reviewing particularly United States economic analyses is to come to the conclusion that employers have good reason not to hire mature job-seekers especially when health and pension systems load their costs directly against mature age. This literature also shows that mature workers are provided with every incentive to stay where they are or to leave voluntarily to a new job from a strong bargaining position. As has been mentioned so often, involuntary job loss is an economic disaster for mature workers as employers, while appreciative of the mature workers they have, see too many disincentives to hire “new” mature workers. In New Zealand these economic disincentives do not appear nearly so strong because of the existing no-fault Accident Compensation Corporation (ACC) scheme where the funding of levies is not associated with the age of employees.