- On Capitol Hill
- On Wall Street
- In the Press
- Policy Reform Work
Our projects are designed to empower policy makers to create positive change. With a focus on collaboration and outreach, we provide original, standards-based research on key policy issues.
SCEPA joined with the Economic Policy Institute on Capitol Hill to brief congressional staff and policy experts on tax expenditures, or incentives given through the tax code without scrutiny by Congress.
SCEPA economists are working on the prospects for a more progressive economic order to emerge from the shock of the recession. They have published papers and documents that place current events in a longer-term context as well as policy proposals to deal with short-term concerns. They are also documenting the emerging discussion of how the discipline of economics is reacting to the Great Recession and the questioning of conventional economic analysis.
Lance Taylor, a SCEPA Faculty Fellow, presents an overview of his new book, Maynard’s Revenge, in a Google Tech Talk.
The book, published this November by Harvard University Press, is a timely analysis of mainstream macroeconomics, posing the need for a more useful and realistic economic analysis that can provide a better understanding of the ongoing global financial and economic crisis.
The government spends $143 billion through tax breaks in an effort to expand pension coverage and security. Yet, over half of the American workforce does not have a pension. Retirement insecurity hurts business plans, workers’ lives and retiree well-being. Reform is needed.
SCEPA’s Guaranteeing Retirement Income Project, sponsored by the Rockefeller Foundation and in collaboration with Demos and the Economic Policy Institute, has a plan to guarantee safe and secure retirement income for all Americans.
On September 30, 2014, PBS Frontline won an Emmy Award for their documentary 'The Retirement Gamble,' that aired on April 23, 2014. The piece investigates the financialization of retirement savings via 401(k)-type accounts and the resulting erosion of an individual's ability to retire.
SCEPA Director Teresa Ghilarducci and Demos Senior Policy Analyst Robert Hiltonsmith, a New School alumni, were interviewed on their work documenting the structural failure of the 401(k) and its corresponding high fees. Ghilarducci states, "The 401(k) is one of the only products that Americans buy that they don't know the price of it. It's also one of the products that Americans buy that they don't even know it's quality."
SCEPA's report 'How 401(k) Plans Make Recessions Worse' describes how the structural flaws of 401(k)-type retirement plans exacerbate recessions in comparison to annuity-backed retirement accounts. The latter, including definied benefit plans and Social Security, serve as automatic stabilizers because they stabilize the economy during both recessions and expansions.
On Cctober 4, 2014, SCEPA Faculty Fellow Rick McGahey published an op-ed on CNN.com, "A Carbon Tax will Create Jobs for Americans." McGahey, Director of the Environmental Policy and Sustainability Management program at The New School, addreses the myth that climate change mitigation will hurt the economy. He cites three studies showing that climate action can be beneficial to the economy from business leaders, the International Monetary Fund (IMF) and the United Nations. Rather than using federal subsidies to support the carbon-creating fossil fuel industry, a modest carbon tax would generate $170 billion by 2030, funds that could be used to create jobs.
This article appeared on Huffington Post's Money blog on September 30, 2014, and as a letter to the editor under the Wall Street Journal's headline, "There Really is a Huge Retirement Crisis Developing."
The Retirement Crisis is Real
The retirement crisis is anything but imaginary. In a recent working paper, we find that only 44% of workers in the United States have access to a retirement plan at work. Except for workers with defined benefit plans, most middle class U.S. workers will not have adequate retirement income - 55% of near-retirees will only have Social Security income at age 65.
Yet, in a Wall Street Journal opinion piece titled, "The Imaginary Retirement Income Crisis," Andrew Biggs and Sylvester Schieber make a number of startling and misleading claims.
Not Enough Retirement Income
First, they claim that the average U.S. retiree has an income equal to 92% of the average American income. Yet, the latest data from the American Community Survey show that the median income of U.S. retirees1 is less than $16,000 compared to the median American worker's income of $31,000 – hardly 92%.2 Retired workers received an average of $1,294 per month in Social Security benefits as of December 2013. That adds up to a paltry $15,528 per year – far from a princely sum to live on when one's medical bills and the expenses of old age are racking up.
Social Security Supports a Stabile Economy
Second, Biggs and Schieber assert that if Social Security benefits are increased, the country will likely experience lower employment and saving rates. Our new study shows the exact opposite. Social Security benefits actually boost the economy during recessions as beneficiaries maintain spending power in a downturn.
Downward Mobility in Retirement
Third, Biggs and Schieber rightly use a reasonable measure of adequacy - retirees' ability to maintain living standards, which compares retirement income to work earnings. They refer to a Social Security Administration's Office of Retirement and Disability Policy (ORDP) report to note that in 2012 the income of the median 67-year-old exceeded his career average earnings. But it would be a mistake to make much of this statement. The median 67-year-old in the ORDP report is taken from a pool of individuals who continue to work and thus have higher earnings and higher years of education than the typical 67-year-old. Recent work by Gary Burtless shows that 67-year-old men with professional degrees are three times more likely to be working than men with a high school education or less. This ORDP pool from which the median is drawn also includes individuals who are claiming Social Security benefits. This helps explain why their incomes appear higher than their career averages.
Less Retirement Income for Gen-Xers
Fourth, Biggs and Schieber claim that the typical Gen-X (born between 1966 and 1975) household will have higher replacement rates than Depression-era birth cohorts. This claim is misleading because it uses an unorthodox measure of replacement rates. The ORDP report actually shows that the more common measure, wage-adjusted replacement rates, has deteriorated over time. Depression and WWII-era birth cohorts have replacement rates of 95% and 98%, while future retirees (born between 1966 and 1975) will have projected replacement rates of 84%.
It is very interesting that Biggs and Schieber decide to use the cited ORDP report to claim that the retirement crisis is imaginary. One of the major findings of this report is that gains in retirement income are largely going to higher socioeconomic groups (whites, the college educated, high earners, and workers with strong labor force attachments). In the age of inequality, the retirement crisis is real.
People need more savings for retirement. Mandatory, protected, and regulated individual accounts in addition to a robust Social Security system will ensure that all Americans have an adequate retirement income and can choose to work or not in their old age.
1U.S. retirees are defined as Americans who are older than 60, are out of the labor force, and had no income from earnings.
2The median worker is defined from a sample of Americans 60 years of age or younger, who were in the labor force.