Presidential candidate Chris Christie repeated his previous call to cut benefits by increasing the retirement age in yesterday's GOP Presidential debate. A Social Security benefit cut would mean individuals nearing retirement need to save more --28% of whom do not have a retirement saving account at all. Older workers without a Bachelor's degree, about 72% of workers aged 62 and older, are especially disadvantaged in the labor market because their wages are stuck and have been stuck for 30 years. If Social Security benefits are cut, older workers would have less bargaining power in the labor market.

Older Worker Bargaining PowerThe Department of Labor announced today that the unemployment rate for older workers (aged 55 and up) was 3.7% in July, which remains the same as last month. 1.3 million older people who wanted to work couldn't find a job in July.

Aside from struggling to find a job, the search for a quality job with good pay is harder for older workers. Workers 62 and over with high school degrees earned $24.16 per hour on average in 2012, just 3.8% more than they earned in real terms in 1982.1 The growing prevalence of low-paying jobs, particularly in the retail sector which employs about 15% of older workers, is a primary reason for wage stagnation and low retirement plan coverage rates in the last 30 years. Fewer than 40% of older workers without a college degree participate in a pension or 401(k)-type plan at work.

In contrast, wages for workers with at least a Bachelors' degree (28% of workers aged 62 and older) increased by almost 33% between 1982 and 2012, to $37.55 per hour.2 And the older workers with pay increases have substantially more pension coverage – 47%.

Raising the retirement age should not be looked at as a job creation policy, but a cut in Social Security benefits creating more retirement insecurity for everyone. Instead of raising the retirement age, Presidential hopefuls should consider expanded access to pensions and savings vehicles, like Guaranteed Retirement Accounts (GRAs), to provide a secure income in retirement. A secure pension, like the GRA, gives older job seekers a cushion and added bargaining power.

1 Current Population Survey, March Supplement 2013. Years provided are end points of three-year intervals (1982 refers to data from 1981-1984, and 2012 refers to data from 2010-2013).

2 Current Population Survey, March Supplement 2013. Years provided are end points of three-year intervals (1982 refers to data from 1981-1984, and 2012 refers to data from 2010-2013).

 

Chris Christie and his proposal to raise the retirement age are officially part of the 2016 presidential campaign. While policies like this are debated on the campaign trail, the labor market for older workers needs to be considered.

Today's job report shows the unemployment rate for black older workers is nearly double that of Whites (3.3% for Whites and 5.8% for Blacks). This shows the perseverance of racial disparities in the labor market for older workers despite lower overall unemployment levels over the last year.

Not only is finding work more difficult for non-White older workers, so is saving for retirement if and when employed. For people of color nearing retirement who are in the bottom 50% of the income distribution – those families earning less than $60,000 a year – only 47% of Blacks have retirement coverage at work, 30% of Hispanics/Latinos and 37% for other racial and ethnic groups, including Asians.

June Unemployment ReportSCEPA has documented how this one-two punch of joblessness coupled with age decreases older workers' bargaining power, further diminishing their ability to save for retirement even if they do find work.

For workers over 55, the labor market – and therefore raising the retirement age - is not a solution. Instead, older workers need access to a strengthened Social Security program and supplemental policy innovations like Guaranteed Retirement Accounts (GRAs).

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."