The chartbook also explores the links between labor market challenges facing older workers and retirement insecurity. Several themes emerge from our research:
- The U.S. population is aging; at the same time, the labor force participation rate is increasing among older Americans. As a result of well-documented flaws in the U.S. retirement system, many older workers hope to continue working as long as possible to make ends meet. However, many face barriers to working longer and lack access to decent jobs with decent pay. Older workers who cannot afford to retire often face diminishing job quality and earnings as a result of loss of bargaining power.
- The connection between work and retirement insecurity is a two-way street. Bad jobs lead to bad retirements, but retirement insecurity also forces older workers to accept bad jobs. Workers with the freedom to walk away from a bad job can negotiate better pay and working conditions with their existing or new employers, individually or as part of a union. In this way they can strengthen the bargaining power of other workers as well.
- Some workers are able to work longer to close the retirement income gap, but expecting workers to work longer is neither a fair nor a realistic solution to a broken retirement system. Some workers may benefit from delaying retirement to increase their savings and accrued benefits while shortening their retirement. But expecting workers to work into old age is neither a feasible nor an equitable solution to the retirement crisis. For one thing, the increase in life expectancy has been concentrated among higher earners with jobs that are less physically demanding. For another, Americans already work more, and longer, than workers in most peer countries.
- Many workers are forced to retire earlier than planned because of poor health, job loss, difficult working conditions, or caregiving responsibilities. Workers who lose their jobs at an older age have a much harder time reentering the workforce than those who lose jobs earlier in their careers; many become discouraged and retire earlier than planned. Despite some health improvements at older ages and a shift from manufacturing to office jobs, many older workers are in poor health or have physically demanding and onerous jobs they cannot reasonably be expected to perform in old age. Those who do manage to keep working into their late 60s and 70s often are just trying to making ends meet by supplementing Social Security benefits with earnings but without accruing retirement benefits or savings.
- Black, Hispanic, women, disabled, and LGBTQ workers are at greater risk of financial hardship at older ages. The root cause of this risk is not poor planning. Rather, retirement insecurity is a systemic problem. Lack of access to employer-sponsored retirement plans explains most of the coverage gap between white workers and Black and Hispanic workers. When Black and Hispanic workers do have access to such plans, the plans are less generous on average than the plans white workers have access to. Meanwhile, lower incomes on average make it harder for Black, Hispanic, women, and disabled workers to contribute to a retirement plan or otherwise save for retirement. Black workers offset some of these disadvantages by gravitating toward public-sector jobs with lower pay but secure pension benefits. While women have caught up with men in retirement plan coverage, their lower lifetime earnings, greater caregiving burdens, and longer life spans put them at higher risk of old-age poverty. LGBTQ seniors face adverse effects of past and present discrimination, including less access to spousal benefits.
- We need to address specific challenges facing older workers. Policies that help level the playing field for older workers include enforcing age discrimination laws, expanding the Earned Income Tax Credit to help more adults without dependent children, implementing policies that reduce the employer cost of providing health insurance to older workers, changing performance metrics used to evaluate worker training programs that lead those programs to favor enrolling younger workers, and creating a dedicated Older Workers Bureau in the U.S. Department of Labor to help identify and address challenges faced by older workers.
- Policies that improve working conditions for all workers can especially benefit vulnerable older workers. Though older workers can benefit from targeted policies, the impact of such policies is often limited. Leveling the playing field for all workers can be more effective in aiding older workers than implementing targeted policies. Broad-based policies that would have a big impact on older workers include macroeconomic policies designed to produce full employment; protecting workers’ right to collectively bargain for better wages and working conditions; ensuring access to affordable health care and caregiving help; enacting paid leave and scheduling policies to ensure workers can take time to care for themselves and their families; fixing a patchwork unemployment insurance system; and measures that better protect workers from injury and illness, including COVID-19 and other infectious diseases.
- Everyone faces significant risks as they age. It is unrealistic to expect older workers to save enough to offset the financial fallout from unexpected job loss, retiring during a stock or housing market downturn, becoming widowed or divorced, or incurring expensive medical or long-term care needs. Even well-off Americans are easily impoverished by long-term care, and they are more likely to live long enough to develop cognitive disabilities and other conditions associated with advancing age and thus to need long-term care.
- Expanding social insurance programs will help contain costs and spread them over lifetimes and across risk pools. Some older workers will have the bad luck of losing their jobs or seeing their net worth plummet during financial market downturns as they approach retirement age. Many Americans will need expensive medical treatment or long-term care, and the likelihood of facing unaffordable costs tends to increase with age. Social insurance programs such as Social Security, Medicare, and Medicaid can serve to lower costs and spread costs and risks over time and across populations, protecting the unluckiest while bringing peace of mind to all. However, these programs need to be expanded, as do safety net programs such as Supplemental Security Income (SSI).
- Chapter One | Older workers: What economic challenges do older workers face? Older workers face challenges linked to age discrimination, poor health, and other barriers to employment. Retirement insecurity also forces workers to stay in bad jobs. Targeted policies can help, but so can policies that improve working conditions for all workers.
- Chapter Two | Retirement: What challenges do workers face in preparing for retirement? Relying on employers to offer retirement benefits has never served U.S. workers well, leaving roughly half of private-sector workers without coverage. Expanding Social Security is the simplest and most effective solution to the retirement crisis.
- Chapter Three | Risk: What economic risks do older Americans face? Americans face increasing economic risks as they age, including risks associated with poor health, job loss, and financial market downturns. Social insurance programs help shield older workers and retirees from these risks but need to be expanded.
The Economic Policy Institute and the Schwartz Center for Economic Policy Analysis would like to thank RRF Foundation for Aging for its generous support of this project.