The COVID-19 economic crisis exposes the flaws and fault lines in the U.S. retirement system. Millions of older workers forced out of work not only stopped contributing to retirement plans, but had to raid their retirement savings to make ends meet. For those who kept their jobs, many saw their employers halt matching 401(k) contributions. Millions of those deemed essential workers continue laboring without any retirement plans at all.
If we do nothing to fix our retirement system, 43 million people now in their fifties and early sixties will be poor or near-poor elders, owing to both the recession and to inadequate retirement plans.1 Widespread retirement insecurity weakens older workers’ bargaining power. Without a solid fallback plan, older workers must accept whatever wages are offered.
The retirement crisis did not begin with the COVID-19 pandemic. Even in normal times, millions of older workers face a choice between earning insufficient wages under bad working conditions or retiring without adequate income. Since half of workers fall into retirement involuntarily (Chart 6), retiring without adequate savings is not their choice.
The reality is that employers and market conditions often determine the desirability of older workers. This differs from the idealized vision of work at older ages, which includes seniority in the workplace, control over hours and pace of work, and a dignified retirement. These are benefits available only to a privileged upper class of older workers.
This chartbook is a resource for workers, employers, media, policymakers, scholars, and the broader public, to answer questions about the state of older working America and retirement income security. Like the Economic Policy Institute’s (EPI) 2019 publication “The State of American Retirement Savings,” we delve into the insufficiency and inequality in retirement savings. This chartbook complements EPI’s analysis by additionally exploring older workers’ challenges in the labor market. It also provides insights into older workers’ economic vulnerability, such as their increasingly fragile finances (Chart 4).
This chartbook connects retirement insecurity to older workers’ basic labor market realities, revealing a central point: secure retirement income boosts older workers’ bargaining power, which leads to better wages, hours, and working conditions. Access to quality retirement savings plans improve older workers’ jobs.
The retirement crisis reflects systemic problems that require systemic solutions. Assigning blame to individuals for saving too little ignores the reality that many older workers are vulnerable because of flaws in the retirement system and imbalances in bargaining power between workers and employers. Addressing the retirement crisis means acknowledging these underlying realities.
Download the full chartbook here.
Retirement Crisis | What is the current state of American retirement security?
12 Million Of The 29 Million Middle-Class Older Workers Will Be Downwardly Mobile In Retirement
Americans Work Longer And Die Earlier Than Elders In Other Advanced Countries
In the U.S., retirement time has failed to keep up with our peer nations. For countries in the G7 group excluding the U.S. (Germany, France, U.K., Canada, Japan and Italy), estimated time between retirement and death for men rose about 75 percent, compared to roughly 50 percent for male elders in the United States. For women, the disparity is greater in absolute terms, with a four-year gap in retirement time opening up since the early 2000s.
Bargaining Power | How are older workers faring in the American labor market?
Half Of Retirees Are Pushed Into Retirement
Retirement Plan Coverage Is Declining Among Older Workers
Workers At Nonunion And Small Firms Lack Retirement Coverage
Retirement coverage varies widely across the labor market. Among the groups that are more likely to lack retirement plans at work are employees at small firms—defined here as those employing fewer than 100 workers—as well as those who are not covered by union contracts. The share of workers lacking retirement coverage is nearly twice as high for nonunion workers compared to workers who belong to unions, a disparity that also holds for workers at small firms relative to those at large employers.
Retirement Plan Coverage Is Highly Unequal
The individualized, do-it-yourself American retirement system doubly disadvantages lower-income workers. Not only are they unable to accumulate as much retirement savings as higher income workers, they also face far lower rates of employer-based coverage at the job. Since the mid-2000s, older workers below the median wage have seen their rate of retirement coverage steadily fall, from 50% in 2002 to 47% as of the most recent data in 2016. Middle-class and higher-income workers have also experienced declining coverage in recent years.
Older Workers Are Getting Paid Less For Their Experience
Typically, more job experience and seniority results in higher wages. But for the last 20 years, older workers experienced falling returns to tenure once we control for other factors like occupation, race, gender, and union status. In the early 2000s, an additional year of tenure was associated with a roughly 1.5 percent increase in wages. By the 2010s, the average returns to tenure fell by almost half to around 0.8 percent. This decrease in returns to tenure reflects diminished bargaining power among older workers, whose on-the-job experience no longer commands the same wage increases as it once did.
Older Workers Face Inequities In Job Quality By Race and Education
Older workers perform more physically taxing work than might be expected. On the whole, nearly 30 percent of workers 55 to 64 are in jobs that require “lots of physical effort” most or all of the time. That physically demanding work is not distributed equally. More than 40 percent of Black and Hispanic workers toil in physically demanding jobs, compared to less than 30 percent of white workers. Workers without more than a high school degree are more than three times as likely as college graduates to find their jobs strenuous on the body.
Elders In The U.S. Work Longer Hours Than In Most Other Developed Countries
Not only do American elders enjoy less time in retirement relative to similar nations (see Chart 5), but they also work longer hours before retiring. Beginning in the 1990s, a large gap opened up between the U.S. and nations in the OECD in average hours worked by those 55 and older. For those between 55 and 64 years old, Americans now work close to 40 hours a week, more than 10 percent more hours than elders in the OECD group of large economies. A major part of this divergence stems from retirement policy: Americans work longer and harder in order to scrape together savings in a retirement system that is stacked against them.
Recessions Hit Older Black Workers Harder
Unemployment is generally lower for older workers than for younger workers. But significant inequalities in unemployment persist between white and black older workers. The racial gap in unemployment rates is widest at the depth of a recession and narrowest when the economy is at its peak, which suggests that black workers are the first fired and last hired over the business cycle. Unemployment data through May 2020 indicate that the COVID-19 recession is again expanding older workers’ racial unemployment gap. Although white older workers’ unemployment rate fell between April and May, the rate of joblessness actually rose for black older workers. Between December 2019 and May 2020, the racial unemployment gap for older workers more than quadrupled, expanding from 0.8 percent to 3.7 percent.
The Aging Workforce | How has the age profile of the U.S. labor force changed?
The U.S. Population And Workforce Is Aging
Older workers are becoming a substantial share of the American labor market. In the 1990s, around 13 percent of those working or looking for work were aged 55 to 64. Today, that share is more than 23 percent. Part of this trend is demographic: the 75 million-strong Baby Boomer generation began turning 55 in 1999, leading to a rapid rise in the share of older workers. But as Boomers retire, the median age of the labor force is expected to stay elevated as workers push back retirement. Older people are working longer because they have to—their retirement income is less secure, which weakens their fallback position in negotiating wages, hours, and working conditions.
Older Workers Will Drive Labor Force Growth Over The Next Decade
Over the past decade, the net growth in the U.S. labor force came entirely from rising numbers of older workers. Employment projections from the Bureau of Labor Statistics predict that in the 2020s workers 55 and over will continue to represent the majority of labor force growth. Increasingly, the working conditions of older Americans will be the working conditions of all Americans.
1. Papadopoulos, M., Fisher, B., Ghilarducci, T., and Radpour, S. Retirement Equity Lab. (2020). “Recession Increases Downward Mobility in Retirement: Middle Earners Hit From Both Sides.” Status of Older Workers Report Series. New York, NY. Schwartz Center for Economic Policy Analysis at The New School for Social Research.
2. Housing debt includes all mortgages on the primary residence as well as other loans against the primary residence. Liquid assets include stocks, bonds, checking and savings accounts, and other reported non-housing assets. Retirement savings are excluded from liquid assets. For a similar methodology, see Lusardi, A., O. Mitchell, and N. Oggero (2018). “The Changing Face of Debt and Financial Fragility at Older Ages.” AEA Papers and Proceedings, 108: 407–411.
3. Johnson, R. W., & Mommaerts, C. (2011). “Age differences in job loss, job search, and reemployment.” Washington, DC: The Urban Institute.
Suggested Citation: Davis, O., Radpour, S., and Ghilarducci, T. (2020) “Chartbook: Retirement Insecurity and Falling Bargaining Power Among Older Workers.” Schwartz Center for Economic Policy Analysis, The New School for Social Research.