The Economic Crisis Putting American Families at Risk
By Mary Gatta | February 19, 2019
As our country braced for another threatened government shutdown last week, federal workers are more aware than ever that they must be prepared for swaths of time without a paycheck. As was clear last month, a staggering number of workers cannot weather a period of missed pay, let alone plan for a time when they can no longer work because of unemployment or illness. And this says nothing of the dream of a well-deserved retirement. But it’s not just government employees who live on this edge. Cringe-inducing stories of working Americans losing their homes, choosing between food and medicine, working just to cover their debt payments, going to work sick because they can’t afford the risk of being fired, and spending hours transferring from bus line to bus line to get to a minimum wage job have been part of the American experience since (and well before) the 2008 financial crisis.
I spent several years interviewing workers in the hospitality sector for my new book Waiting on Retirement: Aging and Economic Security in Low Wage Work. It is clear that we are experiencing a serious economic and moral crisis.
In 2016, the Federal Reserve found that 47 percent of Americans could not cover an emergency expense of $400.
And savings deficits become even more significant as one ages. Wider Opportunities for Women (WOW) finds that more than 50 percent of elderly individuals and couples lack basic economic security in their retirement; these folks worked for years, sometimes even in periods of economic booms, and had some retirement savings. Now think of those currently approaching retirement age. A 2015 Government Accounting Office (GAO) report reveals that nearly 29 percent of American households with members age 55 or older have neither retirement savings nor traditional pension plans. Among those with savings, the median amount for all households with members aged 55 to 64 years old is $104,000 and just $148,000 for households with members 65 to 74 years old.
Gender and race very much matter here. Not surprisingly, labor market inequities are magnified in retirement.
Monique Morrissey describes how the shift from defined benefit plans to defined contribution plans exacerbated racial and ethnic disparities: Up until the 1980s, black and white workers’ participation in employer-based retirement plans was similar. From the 1980s forward, black workers’ participation began lagging and Hispanic workers’ fell even further behind. In 2013, Morrissey documented only 41 percent of black families and 26 percent of Hispanic families with any retirement account savings, compared with 65 percent of white non-Hispanic families. Meanwhile, women generally live longer than men and are more likely to outlive their savings. Because they earned less money throughout their working years (and may have had parenting and caregiving gaps in their work trajectories), those savings were smaller than men’s to begin with. Along with marital status and education, gender and race contribute to retirement gaps that echo wage gaps.
This precarious economic situation is also tied to a changing labor market, a weak retirement system, and astronomically expensive healthcare.
The economic value of worker’s wages has fallen and, as our labor market changes to one characterized by “gig” workers rather than full-time employment, employment-related savings vehicles seem poised for obsolescence. Many Americans now depend on social security for income in retirement, yet median Social Security payments hover at poverty levels. And even when individuals can save, one health crisis can wipe out that nest egg.
I suggest three key components of a corrective economic policy agenda to ensure security for workers and those who can no longer work.
First, secure retirement requires an economically secure work life. A central part of a new social contract, then, is improving jobs so that they offer wages sufficient for economic security, benefit packages, and career ladders toward real advancement. We must both develop and improve jobs that offer fair, non-discriminatory wages and adequate benefit packages. Buffers for crises along the way such as paid family leave and paid sick days are integral.
Second, we must “rescue retirement.” A mixture of social safety net assistance and savings vehicles should provide the income and security Americans need to retire with dignity. Social Security needs modernization, including the institution of a minimum benefit level to curtail later-life poverty and improved benefits for those at the lowest levels.
Currently, those who must take time out of the labor force to care for family members see lower lifetime Social Security benefits; the system should be revised to account for such gaps.
Finally, we must move toward available and affordable health care. Health care concerns are paramount in the minds of retirees and workers alike. Heath care policy must rest on the premise that health care is a right, not a privilege. Universal health care provides workers the opportunity to work in a job that they love, rather than searching for one that “comes with benefits.” This helps to level the playing field for workers in jobs that are traditionally excluded from health care benefits.
Families are struggling, living paycheck to paycheck and just one illness or job loss from economic catastrophe. It is time for a policy agenda that extends economic security across all Americans’ lifetimes.