June Unemployment Report for Workers Over 55

Unlike Prior Recoveries, Older Workers Face Wage Stagnation After the Great Recession Tweet: Unlike Prior Recoveries Older Workers Face Wage Stagnation After the Great Recession http://ctt.ec/t8UDd+ https://pic.twitter.com/RzC9tIJcuh width= 

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.

Older Worker Wage Stagnation 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.

Are Philadelphians Ready for Retirement?

On June 15, 2016, Tony Webb, director of research at SCEPA's Retirement Equity Lab (ReLab), presented a SCEPA report on Philadelphia's retirement crisis before the Philadelphia City Council Committee on Labor and Civil Service. The report, "Are Philadelphians Ready for Retirement?," was done on behalf of Philadelphia City Councilwoman Cherelle L. Parker and the City Council of Philadelphia. Following the hearing, Councilwoman Parker announced plans to introduce a resolution calling for the creation of a task force to address retirement security for private-sector workers in the city.

Workers across the country face a retirement crisis. However, workers in Philadelphia are faring worse than average. 

Philly sponsorship charts
Key Findings:

  1. Philadelphia’s senior citizens are more likely than senior citizens nationally to rely on Social Security for more than 90% of their retirement income.
  2. Only 48 percent (less than half) of all Philadelphia workers ages 25-64 had access to an employersponsored retirement savings plan, compared with 53 percent of workers nationwide.
  3. Only 37 percent of Philadelphia’s workers ages 25-64 participated in an employer-sponsored retirement plan, compared with 45 percent nationwide.
  4. The median near-retirement household in the state’s metropolitan areas had enough financial assets to generate at most $550 a month in retirement income.

February Unemployment Report for Workers Over 55

Wages Stagnate as More Older Workers Join the Labor Market Tweet: Wages Stagnate as More Older Workers Join the Labor Market #JobsReport @tghilarducci http://ctt.ec/bV2w2+ 

The unemployment rate for workers aged 55 and older increased last month for the second month in a row, from 3.7% in January to 3.8% in February. The overall unemployment rate stayed constant at 4.9%.

More older workers are joining the labor market. From 2005 to 2015, the labor force participation rate for men aged 55 to 64 increased from 69.3% to 69.8%. The labor force participation rate of older women increased somewhat more - from 57.0% to 58.5%.

An increasing labor force participation rate for older workers represents an increase in the supply of labor. Whereas an increase in the demand for labor will increase job opportunities and wages, an increase in supply may be associated with reduced both wages and job quality.

The increase in the labor force participation rate from 2005 to 2015 was associated with a slowing in the rate of growth in wages of older workers, indicative of weak demand for labor. Between 1995 to 2005, real weekly earnings for men and women aged 55 to 64 increased by 7.1% and 23.7%, respectively. But between 2005 to 2015, real weekly earnings increased only 2.5% for men and 1.1% for women. This sluggish rate of growth of weekly wages wasn’t the result of a decline in the number of hours worked. The median hours worked among full-time older workers stayed constant at 40 hours per week between 1995 and 2015.

Without well-designed retirement plans, saving for retirement becomes difficult and delaying retirement becomes necessary. This could be why the Bureau of Labor Statistics predicts older workers’ labor force participation rate will continue to grow in the coming decade, especially for women, who have a projected participation rate of 62.9% by 2024. If older workers are unable to retire, it has a ripple effect on the entire labor market, as increasing competition from older workers decreases the bargaining power of younger workers.

We need to ensure older workers a viable path to retirement by creating reliable retirement savings programs to supplement Social Security. For example, Guaranteed Retirement Accounts (GRAs) require employee and employer contributions over a worker’s lifetime and provide guaranteed lifetime income in retirement. With the confidence provided by secure retirement income, older workers can choose to leave the labor market according their own needs, rather than hanging on to undesirable jobs out of financial desperation.

Notes: Data for median weekly earnings in current dollars for men and women age 55 to 64 as well as historical and projected labor force participation rates are taken from the Bureau of Labor Statistics. Inflation adjustments are made using the Consumer Price Index. Median usual hours worked per week figures for workers aged 55 to 64 are calculated by the author from CPS Annual Social and Economic Supplement.

 

December Unemployment Report for Workers Over 55

Older Unemployed Workers Take Longer to Find Jobs than Younger Workers

The unemployment rate is falling for workers in all age groups. For workers over 55, today’s jobs report from the Department of Labor shows an unemployment rate of 3.2% in December, a decrease of 0.5 percentage points from last month.Older Workers Take Longer to Find Jobs

While this is good news overall, if an older worker is out of a job, it will take them 10 weeks to find a new one than their younger counterparts. In 2007, the average time spent unemployed for workers 55+ was 23 weeks, compared to 20 weeks for younger workers, a gap of three weeks. In 2015, the gap increased three fold to ten weeks, with older workers spending 36 weeks looking for a job compared to 26 weeks for younger workers. Older unemployed workers take longer to find a job than younger workers #JobsReport @tghilarducci http://ctt.ec/edh6A+

Whatever the cause, be it age discrimination or biased job training programs, older workers are less able to recover from the shock of losing a job. As their time looking for work stretches out, many turn to early retirement as an escape, paying a high price in decreased standards of living due to inadequate savings. Cutting Social Security benefits by raising the retirement age will fuel the increase in older workers’ income vulnerability. Systemic change requires a comprehensive program in the form of Guaranteed Retirement Accounts to ensure older workers have the retirement income needed to leave the labor market when they chose.

The Diane Rehm Show: Thursday, January 7th, at 11:00am

Ghilarducci How to Retire with Enough Money

I am excited and honored to join The Diane Rehm Show on WAMU 88.5 tomorrow from 11:00am to 12pm to discuss my new book, "How to Retire with Enough Money."