- 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.
The reported unemployment rate for older workers often looks better than that for younger workers. Today’s March employment report shows an unemployment rate for workers aged 55 to 64 of 3.9%, an increase of 0.1 percentage points from the February rate of 3.8%. While older men’s unemployment stayed the same at 4.0%, older women’s unemployment increased from 3.5% to 3.8%.
However, older workers don’t always have an easy time finding jobs. Since the economic recovery starting in 2009, the labor market for older workers has recovered less robustly than for younger workers.
The headline unemployment rate (referred to as U-3) understates the true level of unemployment by only including those actively looking for work in the past four weeks. A broader measure of unemployment - called U-6 - includes both part-time workers who would prefer a full-time job and workers who would look for work if they thought they could get a job (including discouraged workers who have recently given up looking for work). Economists consider U-6 a good measure of slack, or excess supply, in labor markets.
The more inclusive U-6 unemployment rate for workers aged 55 to 64 shows a weaker recovery after the Great Recession. The February 2016 rate of 6.5% (the most recent data available) remains 48% higher than its pre-crisis low of 4.4%, reached in December 2006. In contrast, U-6 for all workers is only 21% higher than its pre-crisis low reached in March 2007.
Two important factors contribute to older workers facing particular difficulties in a recovering labor market. First, older workers are less likely to switch industries relative to prime-age workers. Second, older workers experience longer average spells of unemployment than prime-age workers.
Advocates for cutting Social Security benefits by increasing the retirement age point to headline unemployment rates, which have nearly returned to pre-crisis levels, as evidence that older workers can delay retirement. But the U-6 unemployment rate for older workers suggests otherwise - that delaying retirement is not a one-size-fits all solution for those nearing retirement age without enough retirement savings.
Rather than forcing older workers to fend for themselves in an unfriendly labor market, we need Guaranteed Retirement Accounts (GRAs) to allow workers a safe, effective vehicle to accumulate savings over their working lives so that those with limited labor market options can retire in dignity.
The unemployment rate for workers aged 55 and older increased last month for the second month in a row, from 3.7% in January to 3.8% in February. The overall unemployment rate stayed constant at 4.9%.
More older workers are joining the labor market. From 2005 to 2015, the labor force participation rate for men aged 55 to 64 increased from 69.3% to 69.8%. The labor force participation rate of older women increased somewhat more - from 57.0% to 58.5%.
An increasing labor force participation rate for older workers represents an increase in the supply of labor. Whereas an increase in the demand for labor will increase job opportunities and wages, an increase in supply may be associated with reduced both wages and job quality.
The increase in the labor force participation rate from 2005 to 2015 was associated with a slowing in the rate of growth in wages of older workers, indicative of weak demand for labor. Between 1995 to 2005, real weekly earnings for men and women aged 55 to 64 increased by 7.1% and 23.7%, respectively. But between 2005 to 2015, real weekly earnings increased only 2.5% for men and 1.1% for women. This sluggish rate of growth of weekly wages wasn’t the result of a decline in the number of hours worked. The median hours worked among full-time older workers stayed constant at 40 hours per week between 1995 and 2015.
Without well-designed retirement plans, saving for retirement becomes difficult and delaying retirement becomes necessary. This could be why the Bureau of Labor Statistics predicts older workers’ labor force participation rate will continue to grow in the coming decade, especially for women, who have a projected participation rate of 62.9% by 2024. If older workers are unable to retire, it has a ripple effect on the entire labor market, as increasing competition from older workers decreases the bargaining power of younger workers.
We need to ensure older workers a viable path to retirement by creating reliable retirement savings programs to supplement Social Security. For example, Guaranteed Retirement Accounts (GRAs) require employee and employer contributions over a worker’s lifetime and provide guaranteed lifetime income in retirement. With the confidence provided by secure retirement income, older workers can choose to leave the labor market according their own needs, rather than hanging on to undesirable jobs out of financial desperation.
Notes: Data for median weekly earnings in current dollars for men and women age 55 to 64 as well as historical and projected labor force participation rates are taken from the Bureau of Labor Statistics. Inflation adjustments are made using the Consumer Price Index. Median usual hours worked per week figures for workers aged 55 to 64 are calculated by the author from CPS Annual Social and Economic Supplement.
“A Comprehensive Plan to Confront the Retirement Savings Crisis” is a proposal for a new approach to national retirement savings by SCEPA Director Teresa Ghilarducci and Blackstone President Tony James.
The plan proposes a simple, immediately effective solution to address the fundamental flaws in today’s broken retirement system. If we stay on our current path, America will face rates of poverty among senior citizens not seen since the Great Depression. The strain of this population will have resounding effects across the economy, the government and future generations.
In response to this challenge, Ghilarducci and James have researched and developed a national plan that ensures every worker a more secure retirement. The plan details a single, sustainable framework that allows Americans to save consistently, generate the returns necessary and retire with guaranteed lifelong income. And by repurposing lopsided subsidies and strategically using existing government infrastructure, this plan can be implemented with no new taxes, bureaucracy or increase of the federal deficit.
This plan was developed by an unlikely partnership between Ghilarducci and James. Together, they’ve developed a simple, actionable solution to this impeding crisis.
- “A Comprehensive Plan to Confront the Retirement Savings Crisis” Report
- “A Comprehensive Plan to Confront the Retirement Savings Crisis” Summary
- “A Smarter Plan to Make Retirement Savings Last” in the New York Times
- “Pushing Aside 401(k)’s for Mandatory Savings Plans” in the New York Times
- “One Fix for the American Nest Egg: Make People Save” in the Wall Street Journal
- “Workers and Employers Would Be Forced to Save 3% of Pay Under New Retirement Proposal” in Investment News
- “The Plan That Could Render Your 401(k) Obsolete” in CBS News
- “National Retirement Savings Plan Proposed” in Benefits Pro
- “Is A Mandatory U.S. Retirement Saving Plan In Your Future?” in Reuters