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
Date Written: April 7, 2015
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: Suggested Citation