Why Demotion of Older Workers is a No-Go Area for Managers

CentER Discussion Paper Series No. 2015-025

28 Pages Posted: 9 Apr 2015

See all articles by Hendrik P. van Dalen

Hendrik P. van Dalen

Tilburg University, CentER; Netherlands Interdisciplinary Demographic Institute (NIDI)

Kene Henkens

Netherlands Interdisciplinary Demographic Institute

Date Written: April 7, 2015

Abstract

Demotion – a reduction of an employee’s rank and salary – is often mentioned by managers and policy makers as a measure to increase the employability of older workers, but in practice demotion is rarely applied. This paper takes a fresh look at the question of demotion by first employing a survey among European employers and second the use of a survey and a vignette study among managers in the Netherlands (N=355). The European survey shows that although demotion is not often applied a considerable percentage contemplates the application in the near future, especially those employers who encounter work staff aging. The vignette study offers insight in their stated preferences with respect to demotion for a particular employee, described by a number of possible causes of underperformance. The key question is whether these causes refer to internal or external causes and causes which the employee can or cannot control. By using background characteristics on the manager, obtained through survey questions, we can assess whether the decision to demote is also affected the expectations of managers on the wider consequences of making demotion standard practice. Internal causes such as not willing to participate in training, and not being motivated to work increase the likelihood of demotion, whereas external causes (financial situation of the firm) are of little importance. However, even when an employee scores low points on all possible causes, demotion still is hesitantly considered. Much of this hesitation is connected to the perceived negative externalities which managers expect to materialize once demotion becomes standard practice.

Keywords: older workers, demotion, productivity, wages

JEL Classification: M51, M54, J62

Suggested Citation

van Dalen, Hendrik P. and Henkens, Kene, Why Demotion of Older Workers is a No-Go Area for Managers (April 7, 2015). CentER Discussion Paper Series No. 2015-025. Available at SSRN: https://ssrn.com/abstract=2591814 or http://dx.doi.org/10.2139/ssrn.2591814

Hendrik P. Van Dalen (Contact Author)

Tilburg University, CentER ( email )

Tilburg University
P.O. Box 90153
Tilburg, NL-5000 LE
Netherlands
+13 4668982 (Phone)

HOME PAGE: http://www.tilburguniversity.nl/webwijs/show/?uid=h.p.vandalen

Netherlands Interdisciplinary Demographic Institute (NIDI) ( email )

P.O. Box 11650
NL-2502 AR The Hague
Netherlands
+70 356 5237 (Phone)
+70 364 7187 (Fax)

HOME PAGE: http://www.nidi.knaw.nl/en/staff/vandalen/

Kene Henkens

Netherlands Interdisciplinary Demographic Institute ( email )

P.O. Box 11650
The Hague NL-2502 AR
Netherlands
+3170 3565235 (Phone)
+3170 3647187 (Fax)

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