PENSIONS, NONDISCRIMINATION POLICIES, AND THE EMPLOYMENT OF OLDER WORKERS

This paper analyses firms' decisions to hire older workers. We model t he role of pensions in back-loading pay for specifically trained worke rs. We then evaluate the effects of imposing age discrimination rules and non-discriminatory fringe benefit rules, and analyse the consequen ces for the firms' decision to hire older versus younger individuals. The model predicts that defined pension plans deter the hiring of olde r workers, but only if hired for entry level positions. The reason is that the wages of this group cannot be lowered enough to pay for the b enefits. Data from a new survey of employers are used to test this hyp othesis. The findings show that a more generous defined benefit pensio n plan reduces employment prospects for older, entry level workers. Em ployers offering defined benefit pension plans employ older workers, b ut tend not to hire them into entry level jobs.