Age discrimination: legislation and human capital accumulation

Abstract

PurposeIt is hard to disentangle the possible reasons for differential rates of training incidence amongst older and younger workers. While older workers are less likely to undergo employer‐financed training, many do not take up the opportunity to train. Differences in training incidence are also reflected in the extent to which formal qualifications are associated with individuals from different age groups. The purpose of this paper is to investigate the human capital explanation for these differing experiences and ask whether they can shed light on employers' apparent differential treatment of older and younger employees. In an attempt to highlight the need for additional research in this area before the introduction of legislation in October 2006, the paper proposes considering the issue of mandatory retirement within this human capital framework.Design/methodology/approachThrough a review of the relevant literature and discussion around a number of cross‐tabulations the paper discusses issues relating to age, education and training within a human capital framework.FindingsThe paper finds that, although human capital theory would seem to provide some explanation for the differential experiences of workers of different ages, when viewed from the employer perspective it is the time that an individual has left at the firm that is of importance, not their age per se.Practical implicationsRecent announcements regarding legislation on mandatory retirement ages may result in the time to retirement no longer being such a straightforward function of an individual's age. In this case “training contracts” could be used to specify the minimum time an individual needs to be employed in order that the employer can reap the returns to investment in their human capital.Originality/valueThe paper reviews issues that are relevant to policymakers, human resource practitioners, employers and employees.