Retirement Equity Lab

SCEPA's Retirement Equity Lab, led by economist and retirement expert Teresa Ghilarducci, researches the causes and consequences of the retirement crisis that exposes millions of American workers to experiencing downward mobility in retirement. As a result, SCEPA has developed a policy proposal known as Guaranteed Retirement Accounts Guaranteed Retirement Accounts (GRA) to provide stable pensions to the 63 million workers who currently have none.

 

The February 2015 employment report issued by the U.S. Department of Labor today reports an increase in the unemployment rate for workers over the age of 55. An estimated 62,000 more older workers joined the ranks of the unemployed in the month of February, bringing the unemployment rate of older workers to 4.3% from 4.1% last month.

These changes stand in contrast to the employment situation for all workers (16 years and over). Both the unemployment rate (5.5%) and the number of unemployed persons (8.7 million) edged down in the month of February.

As a sign of more trouble for older workers, the month of February marked a decline for the share of older workers with a job; the employment-to-population ratio declined from 38.3% to 38.0%.

The prolonged sluggishness of the labor market also forced an estimated 125,000 older workers to leave the labor force in the month of February. Older workers are becoming increasingly aware that as they are asked to work further into old age, the workplace grows no friendlier to their needs.

At SCEPA, our research finds that older workers have seen their job quality erode by more physically and demanding jobs. From 1992 to 2008, the proportion of jobs that always require "good eyesight" increased by 26.0%, 31.0% and 78.6% for workers aged 50-55, 56-61 and 62-65, respectively. We find that workers ages 56-61 report a much higher rate of jobs that always require "stooping, kneeling or crouching." In fact, we estimate that the rate of 'all the time' "stooping, kneeling or crouching" has increased by a remarkable 21.9% (for workers ages 50- 55) and 35.9% (for workers ages 56-61).

Teresa Ghilarducci and Adam Hayes published a SCEPA policy note titled, "401(k) Tax Policy Creates Inequality." Though well-intentioned, the current system of tax deferral for retirement contributions undermines public policy aimed at strengthening retirement security for all Americans. In fact, it has become a regressive policy that contributes to wealth inequality.

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This policy notes illustrates how two employees who are identical savers and investors in every way except for income receive different rates of return due only to the effects of the tax code. Converting the current system of tax deductions for defined contribution retirement plans to a refundable tax credit would solve this problem and treat all retirement savers the same.

Scott StringerSCEPA Director Teresa Ghilarducci was named to a group organized by New York City Comptroller Scott Stringer to study how to provide retirement security to New York City residents who lack retirement plans at work. The Comptroller announced his intentions to create the panel at SCEPA's 2014 conference, "Confronting New York City's Retirement Crisis," co-sponsored by the New York City Central Labor Council, AFL-CIO. 

SCEPA's report, "Retirement Readiness in New York City," identified that employer sponsorship of retirement plans is falling. Between 2001 and 2011, the percentage of workers in the New York region with any type of retirement plan – either a traditional pension plan or a more widespread 401(k) plan – decreased from 49% to a mere 41%.

On PointSCEPA Director Teresa Ghilarducci joined NPR's On Point with Tom Ashbrook on February 25, 2015, to discuss President Obama's recent announcement at AARP that the Department of Labor would move forward with a fiduciary rule requiring brokers to put their clients' retirement savings before their own profits.

The rule is expected to protect future retirees from high fees charged by brokers investing individual's retirement savings. In May 2012, Demos, a nonprofit advocacy group and SCEPA partner on retirement security, published the report "The Retirement Savings Drain: Hidden and Excessive Costs of 401(k)s." Written by Policy Analyst and New School PhD student Robbie Hiltonsmith, it finds that the average two-member household will lose over $150,000 over their lifetime from their retirement savings to pay these fees - without their knowledge.

Institutional Investor "States Move to Implement Retirement Accounts," a February 4, 2015, article by Joel Kranc of Institutional Investor, summarizes the movement of retirement reform from the federal level to the state level. "But whereas the federal level is talking, the states are taking action on their own plans," says Kranc. He cites Illinois and California as the early leaders in the effort, both having passed legislation. He summarizes, "Some of the states taking a look at these types of plans are Connecticut, Vermont and Minnesota, which have passed legislation that creates frameworks for a plan. Maryland and Oregon have started taskforces, and 15 others are considering their options as well."

Kranc takes it one step further, interviewing experts to assess the quality and content of plans under consideration. 'Illinois is the first and boldest among 37 states that have something in the works,' notes Teresa Ghilarducci, a labor economist at the New School for Social Research in New York. 'But Illinois has passed the most simple, least regulated and therefore least helpful plan. Other states are looking at ways to create exchanges or a public option that creates a low-cost option. This is certainly a state-by-state movement for add-on plans,' she says." 

In 1950, the United States could claim racial equity in one important respect - both black and white American men who reached age 65 could expect to live twelve more years to age 77.

By 2010, white men at age 65 were projected to live almost 2 years longer than black men, while white women could expect to live one year longer than black women.

racial disparities PN graph 3

Given that gaps in life expectancy at age 65 exist between black and white Americans, the fact that the “average” American is living longer cannot be used to justify proposals to raise the retirement age. In fact, the data reveal that such a proposal will disproportionately impact Blacks. 

Read SCEPA's full report investigating the racial disparities behind proposals to raise the retirement age.

The January 2015 employment report issued today by the U.S. Department of Labor reports that 1.41 million workers over age 55 were ready to work and actively seeking a job - but could not find one.

Unfortunately, this represents an increase in unemployment for older workers - the opposite of declining rates of unemployment in the overall labor market. January's unemployment rate for older workers is 4.1%, up from 3.9% in December. This increase represents an additional 60,000 older, unemployed workers.

Increased competition among older workers in the job market fuels the decline in older workers' bargaining power and a subsequent decrease in retirement benefits available in the workplace, such as employer-sponsored retirement plans.

Today's employment report is a warning for policy makers calling for a rise in Social Security's retirement age. Rising unemployment rates for workers over 55 shows the labor market is unlikely to be able to absorb an increase in older workers who cannot afford to retire when they choose.

bookThe January issue of the Retirement Income Journal features a review of "Falling Short," the new book about America's retirement crisis from the Center for Retirement Research at Boston College, by SCEPA Director Teresa Ghilarducci. In it, she describes the book as an elegant and comprehensive description of the problems causing the crisis, but disagrees with the proposed solution: working longer and retiring later.

older workersThe December 2014 employment report issued today by the U.S. Department of Labor reports the unemployment rate for workers over the age of 55 - those looking for work - at 3.9%. More than 1.35 million workers over age 55 were pounding the pavement looking for a job.

These figures mark a decline in the unemployment rate of older workers from 4.5% in November, when more there were 1.53 million workers over age 55 in search of work. However, the proportion of older workers with jobs did not change; the employment-to-population ratio remained at 38.3%.

Rather than signaling that a significant number of unemployed workers found work, the decline in the unemployment rate for older workers may be due to the fact that 112,000 workers over age 55 left the labor force in December.

SCEPA research has found that older people who lose their jobs are at a higher risk of remaining unemployed and withdrawing permanently from the labor force. This involuntary early retirement leaves older workers at risk of poverty as well as a loss of health insurance years before they are eligible for Social Security benefits. SCEPA estimates this costs the government between $10.5 and $9.4 billion per year in income, food and health support. 

On November 19, 2014, Director Teresa Ghilarducci presented SCEPA's latest research on the Declining Access to Retirement Plans in Connecticut at the Connecticut Retirement Security​ ​Boardmeeting​. Earlier this year, the Connecticut General Assembly created the Connecticut Retirement Security Board through the Public Act 14-217 to conduct a feasibility study on a state-level public IRA. If approved, the state-level IRA would create an automatic IRA administered through an appointed trust fund board, as in California. Employers with five or more workers would be required to participate unless they offer a different retirement savings plan to their employees. Unlike most IRAs bought in the private market, the money would be paid out as a lifetime annuity with an option for workers to select a lump-sum, helping to ensure that people will not outlive their assets while preserving worker's ability to choose the option best suited to their financial needs. Finally, a modest guarantee and low fees would protect the money saved by hard-working employees.

The latest SCEPA research shows that Connecticut is in need of a solution to their pending retirement crisis. As of 2010, only 59% of employed Connecticut residents aged 25-64 worked for an employer who offered access to a retirement savings plan, down from 66% in 2000. Four out of ten workers residing in Connecticut do not have access to a retirement plan at work. What could be considered the most detrimental is that workers closest to retirement​ (55-64) had the largest drop in sponsorship, 15 percent, among all age groups surveyed.