> 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.