This week another GOP presidential hopeful, Jeb Bush, announced his support for raising the retirement age, a policy that would force older workers with inadequate retirement savings to depend on the labor market for needed income and savings. Yet, today's federal jobs report announced a May unemployment rate of 3.7% for older workers over 55 and nearing retirement. This is a decrease of 0.3 percentage points since last month, but it still means that 1.5 million older workers want to work but can't find a job.

This situation is particularly dire for older women. Given women's longer life expectancy, they will need to sock away retirement savings for five more years than men. According to the Census Bureau's Survey of Income Program and Participation (SIPP), over half of older women ages 50-64 have nothing saved for retirement. For women of the same ages who do have retirement savings, their median retirement account balance is $40,000.

Retirement Account Balances by GenderAs we've seen, the labor market is no panacea for the retirement crisis. Older women have an unemployment rate of 3.6% in May, which means 715,000 women over 55 cannot find a job. Meanwhile, more older women are in the labor market. Since the 1980's, older women workers have increased by 171%, from 15 million to 40.5 million. The gender wage gap is also persistent, following women from college graduation through pre-retirement years. In 2013, older women made between $0.73 and $0.80 for every dollar made by men of their own age.

Retirement Account Balances by GenderFor an older woman facing her last years to save, trying to work and save in this labor market means it will take her longer and she will get less.

Raising the retirement age is not a solution, for women or for men. Rather, we need to reform the failing pension institutions that got us here by creating Guaranteed Retirement Accounts (GRAs) on top of Social Security to provide guaranteed income to seniors for life. By allowing people a viable path to saving, we can allow all workers the choice to continue working or to leave the labor market when it doesn't treat them well.

The April employment report issued by the Department of Labor today reports an increase in the unemployment rate for workers over the age of 55. An estimated 21,000 more older workers joined the ranks of the unemployed, bringing the unemployment rate of older workers up to 4.0% from 3.9% in March.

This stands in contrast to the employment situation for workers 16 years and over. Both the unemployment rate (5.4%) and the number of unemployed persons (8.5 million) edged down in April.

While today's report shows a rise in the share of workers age 55+ with a job - the employment-to-population ratio increased from 38.3% to 38.5%, as an additional 266,000 older workers were counted as employed - this is explained by the fact that 286,000 more older workers entered the labor force in April hoping to find a job. This increased the labor force participation rate for this group from 39.9% to 40.1%. Unfortunately, many of these workers ended up among the 1.37 million older jobseekers who could not find a job.

Older workers continue to make up the second-largest group among the long-term unemployed, those actively seeing employment for 27 weeks or more. In fact, the share of older workers long-term unemployed rose in April - more than 39% of unemployed older workers have been searching for employment for 6 months. As of last month, job seekers between the ages of 55 to 64 spent an average of 46.4 weeks actively looking for work and those 65 years and older spent 47.1 weeks.

Presidential hopefuls calling for an increase in the retirement age should heed the signs of a job market struggling to accommodate older workers. Calling for an increase in the retirement age as a solution to a lack of retirement savings overlooks nearly half a century of economic literature on earnings. Economists have long known that age/earnings profiles have a parabolic shape, demonstrating a visible decline after the ages 55-59 as older workers are overlooked for promotions and on-the-job training. As can be seen in Figure 1, workers experience a decline in earnings after ages 55-59 regardless of education levels.

Today's job numbers and what we know about the age/earnings profiles of full-time workers in the U.S. reminds us that work in old age is not the solution to the retirement crisis. To restore the position of older workers in today's job market, we must create new retirement savings vehicles, such as GRAs. Safe pensions and adequate retirement assets allow older workers to explore new jobs that help them transition into retirement, experiment with self-employment, and even quit jobs that don't pay enough to live with dignity and save for retirement.

In March 2015 the U.S. Department of Labor reports that the unemployment rate for older workers fell from 4.3% in February to 3.9%. As a sign of labor market strength, 200,000 older people joined the ranks of the employed and job seekers, which increased labor force engagement from 39.7% to 39.9%. Employment for workers aged 55 and over increased by more than 300,000, so the employment-to-population ratio for older workers rose from 38.0% to 38.3%.

Older workers have done better than workers 16 and over. Their unemployment rate (5.5%) and the employment-to-population ratio (59.3%) remained constant in March.

The rise in employment among older workers is certainly good news. These fortunate workers are no longer queuing for job vacancies. But what types of jobs are older workers landing? Instead of extending their middle-class careers, larger shares of older workers are working in low-wage industries.

The data shows that all American workers with Bachelor's degrees have moved increasingly into service and retail jobs, however, the portion of educated older male workers moving into low-wage jobs is even higher. The proportion of men ages 55-62 working in service increased by 45.7% from 1980 to 2010. In 1980 over a fourth, 27.2%, of men with BAs worked in service jobs and, in 2010, almost 4 out of 10 (39.6%) worked in service jobs. The results are similar for educated men in the older groups: the share of educated men ages 63-69 in service soared by 61.2%, and the oldest of old (ages 70+) increased their share in service by 44.7% since the early '80s.

Along with my co-authors at SCEPA's Retirement Equity Lab (ReLab), I released a report today that is the first to quantify the real effect of the retirement crisis - poverty. The report, "Are U.S. Workers Ready for Retirement?" identifies the share of people whose projected income in retirement will be below poverty across states. This message of downward mobility is important both to individuals whose retirement institutions are failing them and policy makers who will inherit the impact of increasing poverty on both social welfare and municipal budgets.

The report finds:

  • 33% of current workers aged 55 to 64 are likely to be poor or near-poor (less than 200% FPL) in retirement based on their current levels of retirement savings and total assets.
  • 55% of retirees will be forced to rely solely on their Social Security income.
  • Some states are worse off than others. 41% of near-retirement workers in Florida may experience poverty or near-poverty in retirement, followed by North Carolina and Texas.

Why?

  • Almost half of Americans who were working in 2011 were not offered a retirement account at work.
  • 68% of the U.S. working age population (25-64) did not participate in an employer-sponsored retirement plan because their employer did not offer one, they elected not to participate or were not working.
  • The amounts saved through employer-sponsored defined contribution (DC) retirement plans are only slightly better off than those without a retirement plan.

 

Downward Mobility is a Long-Term Trend Decreasing sponsorship of retirement plans has fallen nationally since 2000. Retirement plan participation rates follow the same pattern. This suggests that the declining sponsorship and participation rates identified in this report are not a temporary artifact of the 2008-2009 recession, but a product of persistent structural trends. If these trends continue, it is likely that retirement plan sponsorship and participation rates will continue to sink and the retirement readiness of U.S. workers is likely to get worse in the absence of efforts to improve the situation. Retirement Reform to Prevent Poverty & Systemic Failure In 2014, SCEPA found that declining bargaining power of workers, along with a decrease in firm size, were the largest predictors of the drop in sponsorship rates. Policies addressing diminished bargaining power and work to increase workers’ access to employment-based retirement savings vehicles are necessary to reverse the erosion of future retirement income. This includes creation of Guaranteed Retirement Accounts (GRAs), or personal retirement accounts funded by contributions from workers and employers and converted to annuities upon retirement.

After testifying before the Nevada State Assembly on March 3, 2015, the Las Vegas Review-Journal ran my op-ed, "Nevada PERS a Model for Nation; Don't Change It." In the article, I expand on my argument against AB 190, legislation that proposes to convert the state's public pension system from a successful defined benefit (DB) plan to a historically unsuccessful hybrid that decreases DB benefits to add on a defined contribution (DC) plan.

"Imagine that your bank advised you to refinance your mortgage. Except that instead of enjoying lower monthly payments and reducing the debt on your home, your mortgage payments will increase and your overall debt will skyrocket.

That’s a bit like the conversation that lawmakers in Carson City are having over the future of the Nevada Public Employees Retirement System, the mechanism by which the Silver State’s teachers, firefighters, police officers and other employees earn a modest, but secure retirement benefit."

The February 2015 employment report issued by the U.S. Department of Labor today reports an increase in the unemployment rate for workers over the age of 55. An estimated 62,000 more older workers joined the ranks of the unemployed in the month of February, bringing the unemployment rate of older workers to 4.3% from 4.1% last month.

These changes stand in contrast to the employment situation for all workers (16 years and over). Both the unemployment rate (5.5%) and the number of unemployed persons (8.7 million) edged down in the month of February.

As a sign of more trouble for older workers, the month of February marked a decline for the share of older workers with a job; the employment-to-population ratio declined from 38.3% to 38.0%.

The prolonged sluggishness of the labor market also forced an estimated 125,000 older workers to leave the labor force in the month of February. Older workers are becoming increasingly aware that as they are asked to work further into old age, the workplace grows no friendlier to their needs.

At SCEPA, our research finds that older workers have seen their job quality erode by more physically and demanding jobs. From 1992 to 2008, the proportion of jobs that always require "good eyesight" increased by 26.0%, 31.0% and 78.6% for workers aged 50-55, 56-61 and 62-65, respectively. We find that workers ages 56-61 report a much higher rate of jobs that always require "stooping, kneeling or crouching." In fact, we estimate that the rate of 'all the time' "stooping, kneeling or crouching" has increased by a remarkable 21.9% (for workers ages 50- 55) and 35.9% (for workers ages 56-61).

These findings are troubling because, as the National Center for Chronic Disease Prevention and Health Promotion points out, maximum strength diminishes after the age of 30 and by the age 65 maximum oxygen intake is reduced by 30%. This means that a lot of older workers are often working at maximum capacity.

We also know that as the workforce ages, the incidence of disability also rises. The University of Wisconsin-Madison's Trace Center study finds that the incidence of disability among working-age Americans is: 9.5% for workers in the 18- to 24-year-old range, 20+% for workers in the 45- to 54-year-old range, and nearly 42% for workers in the 65+ age range. Unfortunately, McMullin and Shuey (2006) find that when an employer believes a worker's limitations are due to "natural aging," accommodation is less likely.

These findings are in line with a Society for Human Resource Management (SHRM) study, which shows a majority of companies have not made special provisions for older workers. Older workers, for example, are often denied access to training, as employers are more likely to favor early-career and mid-career employees. Older workers also report wanting to move away from the standard nine-to-five, five-day workweek. Yet, only about 10% of workers are enrolled in formal, employer-sponsored flextime programs.

Clearly, the workplace remains far from friendly to older workers. It is no surprise that a lot of them are having a hard time findings work and find themselves forced to leave the labor force altogether.

SCEPA's Retirement Equity Lab at The New School published my paper with co-author Adam Hayes titled, "401(k) Tax Policy Creates Inequality." Though well-intentioned, the current system of tax deferral for retirement contributions undermines public policy aimed at strengthening retirement security for all Americans. In fact, it has become a regressive policy that contributes to wealth inequality.

Ghilarducci Hayes PN 2015-1 graph 1

This policy notes illustrates how two employees who are identical savers and investors in every way except for income receive different rates of return due only to the effects of the tax code. Converting the current system of tax deductions for defined contribution retirement plans to a refundable tax credit would solve this problem and treat all retirement savers the same.