You mention colllege grads being cheap, then also say: "I’ve witnessed college grads getting paid much much more than senior employee.".

Its all about economics over time.

Those starting IBM straight out of school then sticking around for 10 years vs. people coming into IBM with 10 years of experience are two separate worlds.

For example: if you started IBM 10 years ago with an undergrad, you might have been offered $55k where I live.

Then over time, you might get 2 promotions and economical raises from software engineer -> staff software engineer -> advisory software engineer. You might work yourself up to $100k. However, they would motivate new grads with ivy league degrees with 100k offers. It made me physically ill at one point working in hiring and watching coworkers get turned down for minor requests for raises to amounts lower than what these fresh faces are getting before negotiations start.

If you want to hire someone with 10 years of outside experience, those people would command at least $150 - $175k, but IBM could get 3 college grades for the price of 2 experienced hires.

Thats what I mean about college grads getting paid more than more senior employees, while college grads are cheaper than experienced hires.

Those who worked at IBM for 20 years have less motivation to keep up with current trends and tend to focus on proprietary offerings they work on. As a result, college grads are better economical value since they come 'pretrained' with the new stuff. This is my theory why older people are first to go, especially in the short product cycles IBM tend to have.

A previous co-worker who still works at IBM has been there about 20 years and he pulls $140k... I have 6 years out of college so far and pull $150k + $15k bonus + 10% yearly RSUs at a listed public business down the road. Thats not an abnormal salary)

Pensions and other benefits run about 36% of base salary nationally (meaning it could be higher or lower for IBM). College grads aren't usually vested in their pensions, so they may be paid higher salaries and net a lower expense to the company. What's aggravating (especially from the younger posters) is the assumption that older people aren't/won't stay current. Currency is a dubious argument, if you're wedded to an older product, the new stuff doesn't benefit you directly on the job. After that comes quality/rates of errors. Younger employees tend to make hard-learned mistakes long after the older engineers have learned the same lessons. So cost/value isn't the same when comparing older and younger engineers. In the "real" engineering fields, younger engineers are universally required to work directly under licensed (read: older) for precisely this reason. It prevents preventable mistakes.

They can still be cheaper if their pension and other benefits are not at the level of what the older employees are getting.

Colleagues who were old school “bleed blue” types had low copay PPO plans, pensions and other fringe benefits. Benefits were probably 30-35% of salary.

Companies of this size also self-insure with the insurance company providing management. This means that having an older workforce means the company's insurance costs are much higher. Corporate self-insurance is the reason many companies invest in wellness plans, as they offset the costs of insuring less healthy employees.

They have no pensions and I assume worse benefits.

Forgot about the pension. Thank you.

If you're a large company and want to execute mass layoffs it's almost impossible to due so without affecting a disproportionate amount of older workers. This is not to say that ageism does not exist, but the main goal of a layoff is to cost costs and restructure the company to execute on a new strategy. Older workers cost more than younger workers, that's a fact: so most layoffs are going to be designed in such a way to reduce the amount of highly paid workers.

The company I work for executed a 10% reduction a few years ago and the most widely used criteria was to cut people was performance relative to pay grade. If you were grade 20 for example and had a standard performance review you were more likely to be cut than a grade 10 who had a similar review.

>Older workers cost more than younger workers, that's a fact: so most layoffs are going to be designed in such a way to reduce the amount of highly paid workers.

That is not something that makes sense to me. Shouldn't the higher pay be tied to higher performance expectations, so that right off the bat a medium performance review should be more in absolute terms at a high pay grade than a lower one? Are these companies paying older workers more for no reason? If so, there's the problem right there.

> Are these companies paying older workers more for no reason? If so, there's the problem right there.

Exactly. An example, an older worker in my company can solve a complex, domain specific problem and have reasonable confidence it will work in months to come in a matter of days to weeks. A younger college grad would take weeks of on-boarding, weeks of mentorship, and then finally a couple weeks with some hand-holding and extra code reviews to boot, draining resources all around. After all of that, you STILL aren't guaranteed the problem will be solved for months to come.

And if your solution is to have the older developer work with the younger to solve it, congrats you are paying 1.5x salary to do the job slower.

That's not to say any of this bad you need to train new workers.

But the idea that older workers expect more pay, therefore younger workers are cheaper is absurd, and it is ageism 101. There is usually a reason older workers expect more pay and that is because they have become (ideally) good and experienced at their craft, and know the systems they are working on. They can ideally do the job of your 2-3 younger developers. Otherwise the company has given increases to the wrong people and needs to adjust their promotion criteria.

I don't see ageism being chosen as the tech industry's next social justice fight du jour. Oppression because our enslaving workers won't let us bring our dogs or cats to work is probably in the queue ahead of ageism, followed by the fight against plastic straws, so who knows when we will get around to tackling this issue.

This is often the natural result of older workers just being at the same company for a long time. If you assume a 5% raise annually even if you're not that great of an employee, over 20 years you'll be making 50% more after inflation than a new employee would. Then if you factor in pensions, 401k matches, etc. which tend to ramp up over vesting periods you end up with long-term employees being really expensive relative to a new/younger employee.

It would be nice if total compensation was always tied strictly to merit, but that's not the real world for large companies.

All of the things you listed are typically justified as being incentives for employees to stick around. If the value of an employee sticking around is not that high, why are they paid so much to do it? It sounds like the root of the problem is that the company is spending years paying for something that it does not want (long-term loyalty) and then having to enact painful corrections later on down the line.

I don't disagree with you - it often makes no sense, but this is still what I've seen after working with many large companies.

My best guess is that the loyalty incentives start out as a way to retain the best employees, but the incentives are usually applied to everyone (managers generally really don't like to fire people or have to tell them they're not getting a raise). The best employees might not stay as long anyway due to better opportunities elsewhere / desire to move, while mediocre employees stay longer because they have fewer options. The numbers then play out over time and you end up with a pay/performance imbalance.

Let me give you an example. A company I consulted with for quite a while moved its headquarters several states away. Informally (and of course completely off the record), they were expecting to lose about 40% of their employees in the move and were hoping that the majority of those employees would be the older (pensioned) and/or lower performing ones. What actually happened was the reverse - the majority of people who moved were the lower performers because they were unable to find other good jobs in the area prior to the move. They ended up having a lot of performance issues at the new location and had to bring in a huge number of contractors to make up the skills shortfall.

Perhaps other people can provide more view points to corroborate or disprove this theory.

Please note that this does not mean every old employee is bad. I've worked with plenty of amazing people who are 60+, but I've also worked with plenty of 20+ year pensioned employees who could barely work a computer, let alone do their jobs effectively. My comments are here are just to provide context for how large companies often see getting rid of older employees as an easy way to cut costs.

I get what you're saying, it seems that the opposite approach was used. Because of the higher expectations and compensation (higher pay grades got extra stock compensation per year) workers who underperformed at this high level were more vulnerable than those with lower grades.

But the thing is, if you are paying everyone the right amount, a low-performer at 200k/year (who might be delivering only 220k in value to the company) still implies a lot more performance than a low-performer at 50k/year (who is delivering 55k in value). If a layoff predominantly targets highly paid employees, then either 1. you are assigning raises incorrectly, 2. the performance reviews have a systemic error, or 3. your layoff program is irrational.

I guess this boils down to a critique of constant yearly raises, if it's true that everyone's pay always creeps above their performance with time.

> a low-performer at 200k/year (who might be delivering only 220k in value to the company) still implies a lot more performance than a low-performer at 50k/year (who is delivering 55k in value).

It's irrational to lay off either of those employees, and unrealistic that your low performers are all bringing more value to the company than you pay them for. More realistic is that the low performer on 200k is bringing 100k of value, and the low performer on 50k is bringing in 25k (or 0, or -25k...in either case it makes more sense to let the higher paid one go).

You might say, you've been irrational in hiring these guys at all, and certainly in paying them that much. But maybe they were making money last year and the marketplace changed - the irrational thing is that it's generally impossible to cut salaries and better to make 10% of your workforce redundant than to pay them all 10% less.

Or 4. the definition of an older worker is one who won't be overworked and underpaid i.e. more market-aware. Homo Economicus is the limit of an actor as its information about the market approaches infinity; the information asymmetry between IBM and recent college grads is vast, and starts narrowing as that grad ages.

So IBM catches applicants who are making their most rational decisions based on limited information (irrational ones), and fires them when they become more rational. Government regulation attempts to compensate for that.

Agreed, this criteria and execution of the layoffs were widely criticized throughout the company, points #2 and #3 were a major source of tension between workers and management in the following months.

If anything I assume that due to the sheer amount of folks that were laid off (around 10,000), and the fact that layoffs affected every business unit, a truly effective way of executing the layoff was close to impossible.

It would be less galling (not to mention illegal) if that “performance relative to pay grade” standard were applies to management, and C-levels. Your post sounds a lot less favorable if it’s in the true context of the highest paid and least performing were doing the firing.

I wonder if any of those young people were excited, desperate or naive, and not just gullible.