Unemployment: Companies Cut Pricey Older Workers

High salaries and medical costs make older workers casualties in new recession.

March 09, 2009, 6:00 PM

March 10, 2009 — -- Barbara Polahmius said she devoted 13 years to a small California health care agency -- getting rave reviews for her performance, mentoring other employees and taking on extra tasks that weren't part of her job description.

But when the nonprofit was taken over by a large conglomerate eager to cut costs, she was the first to go.

In October, at the age of 58, the Santa Cruz medical information analyst was laid off, replaced by a co-worker -- "a lovely girl," half her age -- whom she had trained.

"I absolutely believe it was my age," she told ABCNews.com. "We were the ones who know about hard work and have accumulated a lifetime of knowledge.

"I couldn't prove it, but I just felt that I was going to be the one they decided to ask to leave," said Polahmius, who has twice survived cancer and is disabled with fibromyalgia. "My health care costs were not inconsiderable."

Anecdotally, some recruiters say they are filling positions once held by older workers -- defined by the federal government as those over 40 -- with eager, inexperienced college graduates.

Though there are no U.S. Labor Department statistics to back up these claims, some lawyers and economists say older workers are easier to let go in a recession when layoffs are happening by the millions.

VOTE: Should companies be able to weed out employees with high salaries and healthcare costs? Share your opinion with ABCNews.com.

"People don't like old people, it's as simple as that," said Janice Goodman, a New York City labor lawyer who specializes in discrimination cases. "They are too comfortable and they don't know new things."

Finding ways to shed older employees -- who are at the top of the salary food chain and cull expensive medical and pension perks -- is nothing new, according to experts.

"It's not surprising if it's happening now," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pa. "What you might see in any time when there are large-scale layoffs, is the fudge-ability increases."

"Let's face it," he told ABCNews.com. "To the extent a company may feel that it is to their advantage -- and I am not saying it's the right or wrong thing to do -- when they are making small-scale cuts, it's more difficult than when they are making large cuts.

"There is more flexibility in determining who is going to go when there's an environment where survival is the key and they are looking for ways to maximize their cost savings."

Company Cover or Job Discrimination?

But, in the worst economy since the Great Depression, corporations have more cover to practice what some believe is outright discrimination.

"I felt it was a combination of factors and when push came to shove and the economy went over the cliff," said Polahmius. "They killed two birds with one stone: They saved money and they didn't have to worry about a square peg in a round hole."

That square peg is the older person and a protected class under federal, state and some city laws, according to legal expert Goodman.

She is getting more calls from those who charge discrimination, but "they are harder to prove."

"It's hard enough to prove age discrimination and no one will say, 'We want to get rid of the old guys.'"

"The pattern has been going on for a while now," she said. "The costs of health care have something to do with it, but it's not the major issue. Usually [older workers] are higher paid and get regular increases. Their pensions are more expensive because they are vested."

Those who work with company recruiters say they are also seeing this restructuring trend.

"There are still budgets to hire a limited number of college students," said Sean O'Grady, executive producer of CareerTV USA, a Philadelphia broadcaster that provides online services to hundreds of colleges around the country.

"Companies are using the recession to restructure their work force and they need to bring in new employees to fill these voids," O'Grady told ABCNews.com.

"No one directly says person X is taking person Y's job, but the layoffs are happening and a select number of the most qualified college students who are ready to hit the ground running are still finding opportunities," he said.

But according to a 2006 study commissioned by AARP, additional health care costs associated with older workers are "far offset by institutional knowledge, loyalty and other positive factors," taking into consideration the training of new workers.

Age and Cost Handicaps

After 25 years in the financial field, Stuart Floyd of Succasuuna, N.J., soon faces a lay-off as a project manager at a major global bank.

He said he "knows for a fact" that his job is being outsourced to India. Even at 43, he is worried that he won't find comparable work.

"It's my age as well as the cost," he told ABCNews.com. "The key issues are the health costs, but much more comes into play. ... It's mostly the age, even though I can't prove it.

"It hurts, especially when you are doing good work and you are told your work is positive," said Floyd, who is responsible for his 80-year-old mother and two brothers. "There are 500 of me looking for the same job and they can find someone younger and pay them a lot less."

Other ABCNews.com readers wrote on our comment boards that so-called "age-ism" had affected them.

"It's just plain and simple," said Brenda Davis of Hermitage, Tenn., who worked for the Nashville Jet Center before it closed down last year and has been unable to find work since.

"I was making $900 a week, longtime employee, but even looking at a lower salary, I have only had three interviews. It is just plain and simple, no one wants to hire a 63-year-old lady so close to retirement. As a single parent for 41 years, I have taken care of everyone, done all I could to keep going, and now I am going, out the door."

"The older you are the harder it is to find work," said Catherine Dickinson of San Diego, Calif., who is a contract worker for a large company. "Most employers are youth-oriented."

"But now there are thousands of lay-offs so it's harder to say I was selected because of my age," she said.

But recruiters in the creative industry say talent is age-blind.

"We're not really seeing as much of an age bias as a skill-set bias," said Allison Hemming, founder of The Hired Guns, a New York City agency. "We are seeing a lot of 'talent upgrades' happening, meaning our clients are being strategic and are replacing underperformers with A-players."

"There is a lot of fresh talent that is suddenly available because of wholesale layoffs happening at companies in almost every industry across the board," she told ABCNews.com. "Many are taking a defensive posture and freeing up cash by downsizing and then 'storing their acorns' in case the recession takes longer to turn around."

But because of "fundamental shifts" in industries like media, entertainment, publishing and advertising, many employers are "heavily weighted" with older workers, according to Hemming.

"Someone who has had a job in a print production role at an ad agency for 20 years may find themselves replaced by a younger worker who has top digital chops," she said. "So in this case, it's not about the older worker's age, it's about demand for the type of work to keep said agency in business and producing the type of work its clients now need."

Still, there are the lucky ones, boomers who have found work in a bad economy. Eric Perkins, 59, recently started with Hired Guns as an administrative assistant to Hemming.

"When I had my interview, age never came up," Perkins told ABCNews.com. "I even said, 'you don't want me; I'm old.' But that was not the case at all."

Still, Perkins admits he was surprised. He has run into age discrimination when interviewing for other jobs.

"I have run into this before," he said. "I knew someone in the company who told me three months later that they had hired some twink. And it was a huge mistake."

ABC News Live

ABC News Live

24/7 coverage of breaking news and live events