December 2017 Unemployment Report for Workers Over 55

The Bureau of Labor Statistics reported an unemployment rate of 3.3% for workers age 55 and older for the month of December, an increase of 0.2 percentage points from November. While this headline unemployment rate is still at historic lows, it only counts as unemployed those who actively sought employment in the last month.

When you add in the “hidden unemployed,” those who want and are available to work or are involuntarily working part time, the rate increases to 8.2%. This broader measure, ReLab’s U-7 calculation, increases BLS’s headline U-3 calculation of 1.2 million to 3.2 million unemployed or under-employed older workers.  

This reserve army of hidden unemployed and under-employed older workers creates slack in the labor market, reduces workers’ bargaining power, and depresses wages and benefits. With 14% of older workers in low-paying jobs and 62% lacking retirement plan coverage, many find it difficult to save for retirement and to say no to a bad job. As Joan Robinson stated in her 1936 essay, “Disguised Unemployment,” only sustained economic growth will bring discouraged workers back into the labor force and low-paid workers into better jobs. Without good jobs, the only option of the official and hidden unemployed will be involuntary retirement and higher risk of downward mobility and old-age poverty.

But these jobs may still not offer retirement plan coverage. Congress should therefore enact Guaranteed Retirement Accounts (GRAs), which provide retirement savings accounts to all workers as a supplement to an expanded Social Security program. GRAs ensure workers save throughout their careers and insure against the risk of old-age poverty due to job loss.

*Arrows next to "Older Workers at a Glance" statistics reflect the change from the previous month's data for the U-3 and U-7 unemployment rate and the last quarter's data for the median real weekly earnings and low-paying jobs.


#U3


Low-Paying jobs


#low 


  #weekly


  #LFP


 Percent without Pensions

This is a repost from Huffington Post.

Happy New Year - and happy new you! Time to take stock of your joints, your gut, and your wallet. The latter includes the biggest source of wealth most of us will ever have – Social Security. For a young family, the insurance value of Social Security is worth about $200,000. We pay for Social Security benefits by paying the FICA tax, which is 12.4% of earnings split evenly between the employer and the employee up to a 2018 cap of $128,400. Ninety-five percent of us will pay FICA all year long because our annual earnings fall below the cap.

However, it is because of this cap that the highest earners in America will stop paying the FICA tax before the end of the first week of January 2018. For example, the top-paid executive at Charter Communication (he makes $98 million a year and got a 500% raise last year) stopped paying by noon on January 1, right about when the ibuprofen kicked in to nurse New Year’s Eve hangovers. The CEO of CBS earned $68 million last year, a 22% raise from the year before, and will stop paying FICA tax by your first day back at work on January 2 (if you aren’t among the millions working on the New Year’s Day).

This game – ‘when do rich people stop paying for Social Security?’ – could go on forever. We can have fun with the calculations: who will finish paying by their first coffee break of the day? After brushing their teeth?

The earnings cap means that people earning the highest salaries (the top 1% is about 133,000 people earning an average of $2.5 million per year) pay into Social Security as if they only earn $128,400 per year. Their Social Security benefits are also calculated as if they make only that amount.

Every year, this cap means that over $2 trillion dollars of earnings escapes Social Security tax. This happens not by design, but by accident. According to Kathleen Romig of the Center for Budget and Policy Priorities, in 1983, Social Security reformers never imagined we would see such a rapid increase in earnings above the cap, nor did they imagine that the bottom 94% of earnings would experience wage stagnation during the 1990s and 2000s. According to the Economic Policy Institute, those earning the highest incomes would enjoy all the earnings gains of the last 40 years.

Of the many policy instruments available to help the middle and working class gain security by rewarding hard work, taxing earnings over the cap for Social Security is one way Congress can address the lopsided growth of income for the lucky few.

Social Security is in good shape and well funded. However, the program will only have enough money to pay ¾ of benefits in 2027 unless the system obtains about $300-$340 billion per year starting in 2028 or a cool trillion now, according to the nonpartisan Congressional Budget Office. To benchmark what $300 billion means, the President and Congressional Republicans passed an unpopular tax bill that cut federal revenue by over 4 times what Social Security needs – by 2028, 83% of the $1.5 trillion tax cut will go to the top 1% of taxpayers.  

Let’s review: Social Security needs $300 billion and $1.2 trillion of the benefits of the recent tax bill went to the top 1% of taxpayers.

Karen Smith at the nonpartisan Urban Institute argues that raising the earnings cap could ensure Social Security’s financial strength. Because raising the cap would mean only a few of the highest earners pay more, it is unlikely to inhibit overall economic activity. The richest people in America would not lose their social status or economic well being, though they and their employer will pay, on average, $300,000 more in Social Security taxes. They will still have the same power, influence, and goods and services. The biggest impact is that Social Security will be solvent.

We could also collect revenue for Social Security from income that is currently not counted as labor income. The richest 20 Americans – including four members of the Mars candy family members and three Waltons - likely earn at least 6% per year in dividends, interest, and capital gains on their wealth, or $45 billion. The lowest 21 million earners also earned $45 billion.

The top 20 richest people in the United States earned $22 billion per year each on inherited wealth and other non-labor sources of income. They did not pay any Social Security tax on that income. In contrast, the bottom 21 million earned $2,000 per year each on average and paid 6.4% of Social Security tax. However, if these billionaires paid Social Security tax on all their income, the Social Security system would instantly have 10% more revenue.

The Retirement Equity Lab at the New School for Social Research (where I am the director) has documented the retirement crisis in America. We need comprehensive pension reform, but private pension reform will not work unless we also shore up and expand Social Security. The first step is to right the wrong of lopsided earnings growth and raise the earnings cap. We should also tax some financial capital to strengthen and expand Social Security.

The vast majority of Americans of all ages, income levels, and political affiliations are opposed to Social Security benefit cuts in any form. Tax increases are the most popular way to fix Social Security among the American public. However, the tax increase will face significant opposition from the 5% or so of Americans whose incomes top that ceiling, as the tax hikes are much larger for the very highest earners.

A National Academy of Social Insurance survey reports that 77% of Americans feel it is critical to preserve Social Security benefits for future generations, even if it means raising taxes. Among respondents, 81% agreed that they don't mind paying taxes into Social Security "because it provides security and stability to millions." This includes majorities of every age group, income level, and political affiliation.

Solving the retirement crisis by shoring up pension income is the best policy idea for the new year. Eliminating the Social Security earnings cap is unlike the sugar and spending austerity resolutions you made: this policy is very little pain and all gain.

While heralding the bipartisan effort and innovation of active states, ReLab's new report, "State Retirement Reform: Lifting Up Best Practices," seeks to broaden options for future legislation by raising up best practices from the movement's early leaders.

This report demonstrates:

  • State-level retirement reform efforts continue to emerge at a breathtaking pace, with 22 states introducing legislation since Trump’s inauguration.
  • State policymakers are modeling legislation on bills moving forward in other states, following four policy vehicles.
  • The comprehensive hybrid model that combines marketplaces, open MEPs, and auto-IRAs provides the best option to increase access to coverage.
  • State-level programs point toward comprehensive reform in Guaranteed Retirement Accounts.

Due to lack of coverage and a systemic reliance on defined contribution plans, workers do not have enough saved for retirement.

ReLab’s policy note, Inadequate Retirement Savings for Workers Nearing Retirement, documents that the median retirement savings account balance for those nearing retirement is $15,000. 

Employer-sponsored retirement plans are intended to bridge the gap between Social Security and targeted retirement income. Unfortunately, in 2014, 35% of those nearing retirement did not have access to retirement plan, a share that has increased over the last 30 years.
account balances v5 framed 2 to upload updated

 In the 1980’s, 401(k) plans - or defined contribution (DC) plans - became widespread. For most workers in the private sector, they replaced rather than supplemented traditional pension plans, or defined benefit (DB) plans.  In theory, DC plans could enable participants to accumulate adequate wealth by the time they retire. But in practice, account balances fall short, reflecting spotty eligibility histories, non-participation, inadequate contributions and employer matches, pre-retirement withdrawals, high fees, and subpar investment returns. These faults are inherent to the DC system and cannot be fixed by regulation.

account balances v5 framed 2 to upload updated

 These low savings balances will not be enough to allow retirees to maintain their standard of living, a fact that is true at all income levels. 

August OWAAG Replacement Rates V2 framed 2 to upload

 The combined effects of cuts to Social Security benefits and the consequences of a broken DC-centric savings system has created a retirement crisis. Few workers without workplace retirement plans save for retirement. Without significant reform to the retirement system, many workers who reach retirement age will be forced to choose between working longer and suffering severe drops in their living standards in retirement. But many older workers cannot work longer due to physical or mental impairment, and those that are capable of working face a labor market unfriendly to older workers.

Rather than worsening the retirement crisis by cutting Social Security benefits, policymakers should both strengthen Social Security and expand retirement plan coverage. Guaranteed Retirement Accounts (GRAs) are individual accounts requiring employers and employees to contribute with a fair and effective refundable tax credit provided by the government. GRAs provide a safe, effective vehicle for workers to accumulate personal retirement savings over their working lives.

November 2017 Unemployment Report for Workers Over 55

The Bureau of Labor Statistics today reported a 3.1% unemployment rate for workers age 55 and older in November, a rate unchanged from October. This low aggregate number hides the prevalence of low-paying jobs among older workers, especially women.

Almost half (48%) of older working women without a college degree are working in low-paying jobs - earning less than $15 an hour - compared to 29% of similarly situated men.1 Older women without a college degree earn a median hourly wage of $15.50 compared to $18.75 for men.  

One reason older women work for low wages is that they lack bargaining power. Without a financial cushion (39% of older women have no retirement savings), people will likely tolerate poor working conditions and low pay. In her book, Nomadland, Jessica Bruder describes a group of people, mostly women, living in RVs and chasing seasonal workincluding Linda. Bruder writes, "Her options for work would dwindle with age, rather than broadening to reflect her years of experience. There seemed to be no way off the treadmill of low-wage jobs. How would she ever afford to stop working?" Many of her subjects lost their jobs and savings in the Great Recession of 2007-2009.

Though many of Bruder’s subjects do not have college degrees, more education does not protect women from a gender wage gap that makes them more likely to work in low-paying jobs. In fact, older working women with college degrees are twice as likely as college-educated men to be in low-paying jobs (22% to 11%). 

To ensure all workers have a secure retirement, Congress needs to not only raise the minimum wage, but also enact Guaranteed Retirement Accounts (GRAs). GRAs provide retirement savings accounts to all workers as a supplement to an expanded Social Security program. The GRA’s $600 refundable tax credit and employer contribution ensure that even low-paid workers, a majority of whom are women, can afford to save for retirement.


1 SCEPA calculations using SIPP 2014 data
*Arrows next to "Older Workers at a Glance" statistics reflect the change from the previous month's data for the U-3 and U-7 unemployment rate and the last quarter's data for the median real weekly earnings and low-paying jobs.


#U3


Low-Paying jobs


#low 


  #weekly


  #LFP


 Percent without Pensions

October 2017 Unemployment Report for Workers Over 55

The Bureau of Labor Statistics today reported a 3.2% unemployment rate for workers age 55 and older in October, a rate unchanged from September. While this aggregate number is low, the reality is that many older workers have low-paying jobs that don’t provide retirement savings coverage. Older women are especially likely to be in low-paying jobs, in part due to the unequal division of household work.

Both men and women ages 55-64 spend the same amount of time working each week – 47.9 hours a week for men and 48 hours a week for women - including both paid work in the labor market and unpaid household work.  But of this total, men spend more time in paid work than women - 30.1 hours for men vs 21.8 hours for women.  Women spend more time on unpaid household work such as food preparation, cleaning, care giving, etc.  Not only do older women get paid for a smaller share of their working time, in the labor market they are more likely than men to be in low-paid jobs – 38% of older women make less than $15 an hour vs 28% of men.1

While older men and women have about the same low rates of access to a retirement plan at work (45% for men and 45% for women), women’s ability to save for retirement is further hurt by the combination of low hourly pay and crowd out of paid work by unpaid work. Older women have a median balance of $90,000 in their retirement accounts, compared to $125,000 for men.

To ensure all workers have a secure retirement, Congress needs to not only raise the minimum wage, but also enact Guaranteed Retirement Accounts (GRAs).  GRAs provide retirement savings accounts to all workers as a supplement to an expanded Social Security program.  The GRA’s $600 refundable tax credit and employer contribution ensure that even low-paid workers, a majority of whom are women, can afford to save for retirement.


1 SCEPA calculations based on 2017 Current Population Survey ASEC, U,S. Census Bureau, Washington D.C.
*Arrows next to "Older Workers at a Glance" statistics reflect the change from the previous month's data for the U-3 and U-7 unemployment rate and the last quarter's data for the median real weekly earnings and low-paying jobs.


#U3


Low-Paying jobs


#low 


  #weekly


  #LFP


 Percent without Pensions

 September 2017 Unemployment Report for Workers Over 55

The Bureau of Labor Statistics today reported a 3.2% unemployment rate for workers age 55 and older in September, a rate unchanged from August. While this aggregate number is low, the reality is that many older workers have low-paying jobs that don’t provide retirement savings coverage.

It’s no surprise that older workers have little retirement savings ($12,000 on average). This is despite the $180 billion a year in tax breaks meant to encourage people to save for retirement. That’s because these tax breaks are highly regressive, giving 66% of the benefits to those in the top 20% of the income distribution – who are likely to save without incentives – while the 35% of near-retirees without retirement plans get nothing.

Rather than address the unfairness and inefficiency of retirement savings tax breaks, the majority party in Congress announced a tax reform plan designed to generate revenue to pay for tax breaks for the wealthy. Reports suggest the needed revenue could come from taxing 401(k) dollars on contribution rather than at withdrawal in retirement, funding current tax breaks by shifting retirement subsidies to the future.

Tax incentives are a key driver of retirement plan coverage and adequacy. In the midst of a retirement crisis, changing the timing of retirement tax breaks does nothing to increase coverage or make the distribution of incentives more equitable.

To encourage retirement savings, Congress needs to give all workers access to coverage and provide fair and effective tax incentives. Guaranteed Retirement Accounts (GRAs) do both. GRAs provide accounts to all workers as a supplement to an expanded Social Security program and replace regressive retirement subsidies with universal tax credits of $600 a year. This ensures that even low earners benefit from federal tax incentives to save for retirement. 


1Authors used data on 2016 tax expenditures and methodology from Harris, Edward, and Joshua Shakin. The Distribution of Major Tax Expenditures in the Individual Income Tax System. Congressional Budget Office, 2013. 
*Arrows next to "Older Workers at a Glance" statistics reflect the change from the previous month's data for the U-3 and U-7 unemployment rate and the last quarter's data for the median real weekly earnings and low-paying jobs.


September Jobs Report


#U3


Low-Paying jobs


#low 


  #weekly


  #LFP


 Percent without Pensions