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 (GRA) to provide stable pensions to the 63 million workers who currently have none.


January Unemployment Report for Workers Over 55  

The Bureau of Labor Statistics (BLS) today reported a 3.5% unemployment rate for workers ages 55 and older in January, a decrease of 0.1 percentage points from December.

The low headline unemployment rate hides a racial gap in the physical job demands faced by older workers. At all income levels, older black workers are more likely to experience physical demands at work than older white workers, Tweet: #JobsReport: Racial Gap in Older Workers’ Physical Demands At All Wage Levels</a> including requirements to lift heavy loads, stoop, kneel or crouch during most of the workday.

The racial gap, which exists at all wage levels, is largest among older low wage workers. The gap among those earning less than $22 an hour is 22 percentage points, with 62% of Blacks in physically demanding jobs compared to 40% of Whites. For workers earning between $22 and $40 an hour, the gap is 11 percentage points, with 43% of Blacks are in physically demanding jobs compared to 32% of Whites. The racial gap persists even for higher earners. For those in the top 20% of the earnings distribution making more than $40 an hour, the gap is 8 percentage points, with 24% of older Blacks are in physically demanding jobs, compared to 16% of older Whites.

This persistent racial gap means that proposals to increase Social Security’s Early Retirement Age would require black workers to continue to do physically demanding work at older ages. To enable all workers to retire - whether due to physical necessity or choice - policymakers should both expand Social Security and create Guaranteed Retirement Accounts (GRAs). GRAs are are individual accounts requiring contributions from both employees and employers throughout a worker’s career. They provide a safe, effective vehicle for individuals to accumulate personal retirement savings and receive lifelong income as a supplement to Social Security.



Dr. Lauren Schmitz, a New School Economics PhD and National Institute on Aging postdoctoral research fellow at the University of Michigan, joined ReLab's Political Economy of Aging series to present her research on the interplay between historical measures of average schooling at the state level in childhood and genetic propensity for educational attainment on years of education, degree completion, and lifetime earnings.

Her study, summarized below, finds that inequality in educational outcomes by genotype emerges among individuals who were educated in states with lower average educational attainment during their primary schooling years.

The Political Economy of Aging speaker series is a forum for academics and practitioners to share and engage in cutting edge research in social policy and the political economy of aging. The series is designed to forge interdisciplinary connections and examine how to progressively manage an aging society. The series is sponsored by SCEPA's Retirement Equity Lab, led by economists and retirement experts Teresa Ghilarducci and Tony Webb.

Paper Abstract: 
This study exploits administrative earnings records matched to detailed genetic and sociodemographic data in the Health and Retirement Study (HRS) to estimate whether the educational environment, as captured by state-level differences in average years of schooling, modify the associations between genetic propensity for educational attainment and individual schooling, and genetic propensity for educational attainment and lifetime earnings.

To capture the complex genetic architecture that underlies the bio-developmental pathways, behavioral traits, and evoked environments associated with educational attainment, we calculate polygenic scores (PGSs) for respondents in the HRS derived from a recent genome-wide association study (GWAS) for years of schooling.

We find evidence that both individual genetic endowment and the state-level educational environment contribute to individual schooling and lifetime earnings, with limited evidence for any interaction between them. The exception is completion of a secondary degree, where we find that individuals educated in states with higher average educational attainment during their primary schooling years were more likely to obtain a GED or high school degree—regardless of genotype—whereas individuals raised in states with below average educational attainment were approximately 7 to 24 percent less likely to obtain a secondary degree than individuals with similar PGSs in higher achieving states.

November Unemployment Report for Workers Over 55 Tweet:

The Bureau of Labor Statistics (BLS) today reported a 3.5% unemployment rate for workers age 55 and older in November, a decrease of 0.2 percentage points from October.

Older Workers in Rust-Belt States Flip

While “Older Workers at a Glance” shows steady growth in real earnings for older workers, national averages mask long-run stagnation and decline in the four rust-belt states - Michigan, Ohio, Pennsylvania, and Wisconsin - that unexpectedly voted for Donald Trump after voting for President Obama in 2012. 

Before Reagan, older workers in these four states received higher wages than older workers in the rest of the country. Now they are doing worse. In 1979, rust-belt older workers were making $3,600 more than their counterparts elsewhere. In 2015, they were earning $4,000 less. Between 1979 and 2015, the median real wage for older workers in the four rust-belt states that flipped to Trump increased only 1% compared to 17% in the rest of the U.S.

Stagnant and declining real wages erode workers’ ability to save for retirement and increase their reliance on Social Security. To address the economic insecurities of working families, the Trump administration needs to create a path to a secure retirement by expanding Social Security and providing universal access to secure retirement plans through Guaranteed Retirement Accounts.


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NEFE 2 graphUSA Today reporter Michael Molinski's article, "Don't Be a Retirement Saving Sucker: 401(k)s Not for Emergencies," discusses a report by SCEPA's Retirement Equity Lab (ReLab) titled, "Household Economic Shocks Increase Retirement Wealth Inequality." 

Economic shocks, such as job-loss, have a particularly adverse effect on the retirement savings of workers in low-income households, exacerbating retirement savings inequality. Low income households are more likely than moderate- and upper-income households to experience economic shocks. Workers in low-income households are also more likely to withdraw from their retirement account after a shock. ReLab's study shows that these shocks have significant effects on the finances of low-income households, causing up to a third of all withdrawals, and possibly more.

“It is not that low-income households are making the wrong decisions, they just have too many obstacles to overcome,” said Siavash Radpour, a research associate at SCEPA. The policy recommendations of this research include a prohibition on pre-retirement withdrawals and a contribution mandate in the form of Guaranteed Retirement Accounts.

Older Workers are Increasingly Concentrated in Low-Wage Jobs Tweet:

The Bureau of Labor Statistics today reported an unemployment rate of 3.7% for workers aged 55 and older in October. However, the unemployment rate fails to reflect the increasing concentration of older workers in low-wage service jobs.

Women are in the majority of low paying jobs for older workersFirst, older workers are more likely than younger workers to be in low-wage jobs. A low-wage job pays less than two-thirds the median wage, or $539 per week. In September, 27.1% of full-time workers aged 55 and older were in low-wage jobs compared to 19.0% of younger workers.

Second, the share of older workers in low-wage jobs has increased over time, while the share for younger workers has stayed the same. The September share of older workers in low-wage jobs, 27.1%, is 1.4 percentage points higher than the share ten years ago (25.7%).

Third, women are the majority of workers in seven of the top 10 low-wage jobs for older workers, primarily service occupations. They make up more than 75% of older workers in four of the top ten jobs, despite being a minority of older workers.

Older workers in low-paying service jobs face extra difficulty saving for retirement. This may be a particular problem for older women workers who are unlikely to have access to a retirement plan. Living paycheck to paycheck, even those with coverage have little room to cut consumption to increase retirement savings.

To enjoy a secure retirement, low-wage workers need a retirement plan, not a low wage job. The need is becoming ever more pressing as the Social Security Full Retirement Age is increased, equivalent to a cut in benefits for those who do not delay retirement. Guaranteed Retirement Accounts (GRAs) supplement Social Security in combating old-age poverty by providing all workers a retirement savings vehicle with low fees and guaranteed growth, allowing even low-wage workers a path to secure retirement.


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Unemployment Rate

Median Weekly Wages for Older Workers

Labor Force Participation for Older Workers

Low Paying Jobs for Older Workers

Older Workers without a Pension


SCEPA Director Teresa Ghilarducci was named to Next Avenue’s 2016 list of Influencers in Aging for her work to reform the broken retirement savings system by giving every American a Guaranteed Retirement Account. Each year, the Influencers in Aging list recognizes 50 thought leaders at the forefront of changing how we age and how we think about aging. Influencers are leaders in improving the lives of older adults and their families and communities. Below is Next Avenue's insert describing Ghilarducci's work. 

Influencers in Aging Description

GRAs Would Supplement an Expanded Social Security

GRAs would not compete with or supplant Social Security. As social insurance against disability and poverty in old age, Social Security must be protected and expanded.

As I wrote in the Huffington Post, "The first step to solve the coming retirement crisis is to make Social Security solvent, without reducing benefits for lower- and middle-income persons....Instead of cutting benefits for these persons, we believe it would make more sense to expand the revenue available to finance Social Security. In our judgment, this represents a far better approach to improving retirement security for all Americans." 

downward mobility imageGRAs are individual accounts that would supplement Social Security. Social Security was not designed nor intended to provide an individual with all the income they would need in retirement. Rather, Social Security is considered one leg of a three-legged stool. The other legs are income from a retirement plan and personal savings. Over the last 40 years, traditional employer-provided defined benefit (DB) pensions have been displaced by defined contribution (DC) plans, including 401(k)s. Not only are 401(k)s ineffective retirement savings vehicles, they are only provided to half of American workers. 

The result of this trajectory is a retirement crisis. Workers without retirement plan coverage cannot save enough for retirement. 401(k) participants are often little better off than those without any coverage, as evidenced by the numbers. Those nearing retirement, including those without access to plan, have a median retirement savings of $12,000.  

GRAs are Designed Like Traditional Pensions to Lower Fees

GRAs are designed to mimic the best practices of traditional DB pensions. DBs provide workers with the benefits of pooled savings, low fees economies of scale, and lifelong income in retirement. These characteristics also allow DB plans to provide better investment returns than 401(k)s or IRAs.

The GRA doesn't obligate fund managers to invest in private equity. It merely allows the trustees, operating under the GRA's fiduciary requirements, the opportunity to invest in private equity if it benefits the participant. DB's have proven this to be true - that the inclusion of alternative asset classes has earned participants higher returns at lower risk.

GRAs would require that private investment managers compete against each other for the work, keeping fees as low as possible. Professional fund managers, including private equity funds, are in DB funds now. The issue is not whether they should be used, but whether or not they receive excessive compensation for poor returns. The GRA ensures that taxpayers and GRA contributors are not taken advantage of and get the best possible deal. This is done through transparent governance, pooled accounts and competition – three hallmarks of DB plans.

SCEPA Director Teresa Ghilarducci was named to Philadelphia’s Task Force on Retirement Security for Private Sector Employees. Chaired by Councilwoman Cherelle Parker, the 16-person group is charged with issuing a report to the Council recommending policy solutions to address the city’s retirement crisis.

In 2016, SCEPA produced a report for the City Council at the request of Councilwoman Parker describing the retirement crisis in Philadelphia. It found that only 47% of Philadelphia’s workforce has access to a retirement plan at work, compared with 53% of workers nationally. Philadelphia’s seniors are more likely to be poor or near poor, with 50% having incomes below 200% of the poverty line, compared with 31% nationally.

Philadelphia is the latest in a series of cities and states to recognize and confront the retirement crisis. Ghilarducci sits on a similar commission for New York State and has been asked to advise on plans in some of the 29 states that have proposed or implemented retirement reform in the past five years.

“Philadelphia is not waiting for the federal government to act on the upcoming retirement crises” according to Ghilarducci. “We at SCEPA found the average 401(k) and IRA balance for older workers is $14,500 and half the workforce does not have access to a retirement plan at work. Middle class retirees risk working into their 70s or living an impoverished retirement. We hope to help all Philadelphia workers retire by contributing to a professionally managed, low fee retirement account that pays a pension for life.”

In the absence of federal action, cities and states have taken the lead in proposing solutions to the retirement crisis. But to provide everyone a viable path out of the retirement crisis requires a national solution. Ghilarducci proposes Guaranteed Retirement Accounts -- mandatory, universal savings accounts with a guaranteed rate of return -- as the best way to ensure that everyone can retire with dignity.

More than 1 in 10 Older Workers Who Want a Job are Unemployed or Underemployed Tweet: More than 1 in 10 older workers who want a job are unemployed or underemployed #JobsReport</a> width=

This morning’s job report from the Bureau of Labor Statistics (BLS) calculates a 3.6% unemployment rate for workers age 55 and older in September, an increase of 0.1 percentage points from August. Given this low rate, the labor market for older workers appears healthy. However, if we include all those over 55 who reported in August they would like a job, more than 1 in 10 were either unemployed or underemployed.

Unemployment Rate Overstates Labor Markers for Older WorkersThe 3.6% headline unemployment rate, referred to as U-3 by the BLS, includes only workers who actively sought work last month. The BLS also reports U-6 for all workers, a broader definition of unemployment that also includes those who looked for work within the past year or worked part-time while wanting full-time jobs. However, this still misses the “hidden unemployed,” those who would like a job but gave up looking more than a year ago. Since the BLS doesn’t compute this number, we use the latest available Current Population Survey (CPS) data from August to calculate an unemployment rate that includes the hidden unemployed, which we call U-7.

The BLS reports an August headline U-3 unemployment rate for older workers of 3.5%. Using CPS data, the same data used by the BLS to calculate U-3, we calculate the broader U-6 measure at 8.7% for workers over 55, and our inclusive U-7 rate at 11.1%. U-3 represents 1.3 million older Americans who looked for a job in the month of August, U-6 includes an additional 425,000 people who looked for work within the last year and 1.4 million who worked part-time while wanting full-time work, and U-7 includes an additional one million hidden unemployed.

Many discouraged older workers give up looking for a job and involuntarily retire. However, early retirement is far from a panacea. First, retiring early means lower monthly Social Security benefits. Second, because households nearing retirement have a median of only $12,000 in retirement savings, early retirement increases the risk of downward mobility and old-age poverty.

With more than 1 in 10 older workers either unemployed or underemployed, delaying retirement is not a solution to the failings of the retirement savings system. Guaranteed Retirement Accounts (GRAs) provide a mechanism to ensure workers save throughout their careers and insure against the risk of old-age poverty due to job loss.


nancy pelosi and rescuing retirementOn Tuesday, September 20, 2016, POLITICO's Ben White hosted co-authors Teresa Ghilarducci and Blackstone President Tony James for a "Cocktails and Conversation" event featuring their new book, Rescuing Retirement.

The event welcomed representatives from the media, government, industry, non-profits and advocacy groups as stakeholders in the need to solve the retirement crisis. Ghilarducci and James, left, shared their book and proposal for Guaranteed Retirement Accounts (GRAs) with House Minority Leader Nancy Pelosi.

Ghilarducci and James are working to lift up the efforts of 27 states working to provide a retirement plan for all Americans. The GRA would provide all workers with a safe place to earn higher rates of return than in a 401(k) and ensure workers a stable income for the rest of their lives.