Unlike Prior Recoveries, Older Workers Face Wage Stagnation After the Great Recession
The unemployment rate for older workers was 3.5% in June, increasing by 0.1 percentage points from May. The wage growth in June for older workers is not released today. According to conventional economic theory, a low headline unemployment rate is associated with rising wages. But unlike prior economic recoveries, older workers’ earnings stagnated in the five years after the Great Recession.
Between 2010 and 2015, workers over 55 with full-time jobs experienced a decline in median real weekly earnings (-0.8%). In prior recoveries, older workers experienced high earnings growth. In the five years after the 2001 recession, earnings grew 2.3%, 1.0% in the five years after 1991, and 5.9% after the 1982 recession.
Wage stagnation can indicate a weak labor market and low bargaining power, even when headline unemployment is low. And while it affects all workers in today’s labor market, stagnation especially harms older workers.
The average household approaching retirement has retirement savings of only $150,000. In retirement, this sum will only provide $500 a month in income - far short of what’s needed to maintain retirees’ standard of living. However, near retirees' need to prioritize savings is hamstrung by stagnant wages, forcing them to choose between cutting pre-retirement consumption or arriving at retirement with insufficient savings.
America faces a retirement crisis brought on by poorly designed retirement plans and compounded by wage stagnation. Cutting Social Security benefits by raising the retirement age would further erode retirement security. Americans need a reliable way to save for retirement in addition to Social Security. Guaranteed Retirement Accounts (GRAs) open a path to retirement security by providing all workers retirement savings plans with guaranteed growth.