Older Men’s Bargaining Power Hit by 36% Decrease in Job Tenure

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December 2018 Unemployment Report for Workers Over 55

The Bureau of Labor Statistics (BLS) today reported a 2.9% unemployment rate for workers age 55 and older in December, which represents no change from November.

Despite the low headline unemployment rate, changes in job tenure over the last 30 years have reduced older workers’ bargaining power, especially older men.click In 1987, the median number of years older prime-aged men (45-54) were with one employer was 12.7 years. In 2018, their median job tenure fell 36% to 8.1 years. For older workers age 55-64, men’s job tenure fell 16% during the same time period (16.8 years to 14.1 years), a drop that likely reflects older male workers leaving the labor market.

Economists Alicia Munnell and Steven Sass report that older men’s decreased job tenure reduces salaries and access to benefits such as retirement coverage. An older worker who changes jobs will likely have to take savings out of their 401(k) plan before retirement and find a new job that pays 25% less.

Due to an inadequate retirement savings system, older workers are less likely to be able to bargain for better wages, hours, working conditions, and benefits. This broken system results in a growing number of indigent elderly. If workers currently ages 50-60 retire at age 62, 8.5 million people are projected to fall into poverty.

To reinstate bargaining power, we need to ensure older workers can afford to retire through the expansion of Social Security and creation of Guaranteed Retirement Accounts (GRAs). GRAs provide all workers with universal, secure retirement accounts funded by employer and employee contributions throughout a worker’s career, paired with a refundable tax credit.

*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.

 

Why Focus on Older Workers?

With 10,000 baby boomers turning 65 every day, the American labor force is transforming. Out of the 11.4 million jobs expected to be added to the U.S. economy by 2026, 6.4 million will be filled by workers over 55. Moreover, all of the net increase in employment since 2000—about 17 million jobs—was among workers aged 55 and older. The aging American workforce and these workers’ lack of retirement readiness will shape employment patterns, the direction of public policy, and the strength of workers’ bargaining power for all American workers, old and young.

 


The Gray New Deal: General Theory of Employment, Retirement, and Money

This is a transcipt of a keynote orignally presented at the Association of Social Economic's 2020 ASSA Reception.

 

(Photo by: Martha Susana Jaimes)

 

The Gray New Deal: General Theory of Employment, Retirement, and Money

Teresa Ghilarducci

Keynote for the Association Social Economics’ ASSA Reception

January 2 6:30 pm

San Diego ASSA

 

Over the last thirty years, we have witnessed a doomsday for pensions. The vast majority of the ten thousand baby boomers turning 65 every day do not have enough income to maintain their standard of living. For the first time in modern history, the American elderly will be relatively worse off than their parents and grandparents. If nothing happens, almost half of middle-class workers over 50 will be poor or near-poor retirees by 2030. Many will turn to work—any kind of work. The failing do-it-yourself American pension system is causing the coming humanitarian and political crises and a deep disturbance in labor markets.  

There are two policy tracks addressing the coming old-age income crises. One track fights age discrimination, promotes job retraining, extolls the benefits of paid work and does not prioritize securing retirement income.

The other track is a Gray New Deal. A Gray New Deal recognizes that civilized democratic societies provide adequate pensions, allowing people to retire in dignity.

A Gray New Deal competes with what I call the “working longer consensus.” Doubtless members of the Association of Social Economics remember the 1980s global economic policy framework, the Washington Consensus, which promoted pro-market, pro-austerity policies. The Washington Consensus was so named because it came from Washington, D.C.-based institutions such as the International Monetary Fund (IMF), World Bank, and the U.S. Treasury and was supported by academics.

Older Workers at Risk in Next Recession

November 2018 Unemployment Report for Workers Over 55

The Bureau of Labor Statistics (BLS) today reported an unemployment rate of 2.9% for November, an increase of 0.1 percentage points from October.

Older workers are benefiting from a historically low unemployment rate. Now is the time to prepare for older workers’ higher risks in recessions.

Older workers least prepared for retirement are most likely to end up jobless in a recession. During the Great Recession, 16.1% of older workers without retirement plan coverage lost their jobs and either remained unemployed or retired involuntarily. click Those with coverage fared better - 10.7% of those with a 401(k)-type defined contribution (DC) plan and 8.5% of those with a defined benefit (DB) plan were unable to find a new job.

Even workers on track for a secure retirement aren't out of the woods. If they lose their job, they likely stop saving for retirement and may have to draw down assets prematurely, putting them at risk of outliving their wealth.

To protect older workers from the effects of unemployment or involuntary retirement, including downward mobility and poverty, we need to ensure workers have bargaining power. Bargaining power allows older workers time to seek a good job, negotiate better pay and working conditions, or choose to take a dignified retirement.

​To ​ensure a dignified retirement​ for all, we need ​to expand unemployment insurance, Medicare, Medicaid, and Social Security ​and create Guaranteed Retirement Accounts (GRAs). GRAs ensure all workers a secure path to retirement by providing universal, secure retirement accounts​. GRAs are professionally managed,​ funded by employer and employee contributions​ - ​paired with a refundable tax credit​ - and provide monthly benefits for life.

*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.


Strong Labor Market Is Not Bringing Unemployed Older Americans Back to Work

October 2018 Unemployment Report for Workers Over 55

The Bureau of Labor Statistics (BLS) today reported a 2.8% unemployment rate for workers age 55 and older in October, which reflects no change from September. The headline rate remains near a record low, as it has for a year.

Despite reports of a hot job market for older workers, older Americans are not being lured back to work. At a time when economists would expect new entrants* to the labor force to be increasing, the share of new workers in the older workforce fell last month by over half from the beginning of 2018, from 2.5% in January to 1.0% in September. click

The drop in new entrants could mean the labor market has absorbed almost all the older people who want a job. That would be good news, but our evidence points in another direction. The share of older people who want a job but don't have one (ReLab’s U-7) has not recovered to pre-recession lows. At 7.4%, U-7 is 0.8 percentage points higher than the pre-recession low of 6.6%. Even for the college educated, U-7 is 6.8%.

There are two main reasons why older workers are not entering the labor market. First, older Americans, especially older women, face age discrimination in the hiring process, which discourages job search. Second, most jobs created in the recovery have been low-paying, low-quality jobs, including contingent and alternative jobs.

This evidence does not support the belief that the retirement crisis can be solved by working longer. To ensure workers can retire in dignity, policymakers should expand Social Security and create Guaranteed Retirements Accounts (GRAs). GRAs are universal, secure retirement accounts funded by employer and employee contributions throughout a worker’s career paired with a refundable tax credit. These policies will help prevent downward mobility in the event of involuntary retirement.

*New entrants are defined as those previously not working who found a job in the last year.
**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.


52% of Older Workers Forced into Involuntary Retirement

August 2018 Unemployment Report for Workers Over 55

August2018 Jobs ReportThe Bureau of Labor Statistics (BLS) today reported a 2.8% unemployment rate for workers age 55 and older in September, a decrease of 0.3 percentage points from August.

Despite the low headline unemployment rate, many older workers leave the workforce involuntarily. click

Older workers often need to continue working to make up for inadequate retirement savings due to lost pensions and inconsistent employer contributions. Yet, from 2008 to 2014, at least 52% of retirees over 55 left their last job involuntarily, the result of job loss or a deterioration in health.

Those pushed into retirement early face barriers to returning to work. They are likely to be unemployed longer than younger people, and when they find a job they will earn on average 25% less than their previous salary.

Working longer is not a solution to the retirement savings crisis. Workers cannot rely on being able to work until they are ready to retire. Those who have inadequate retirement accounts and leave the workforce involuntarily are at risk of being downwardly mobile and falling into poverty.

To ensure people can retire when they need to without experiencing deprivation, we need to strengthen Social Security and create Guaranteed Retirements Accounts (GRAs). GRAs are universal, secure retirement accounts funded by employer and employee contributions throughout a worker’s career paired with a refundable tax credit. Together, these proposals would allow all Americans access to dignified retirements after a lifetime of work.