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Labor Market Changes and Wealth Inequality

Paper Session

Friday, Jan. 5, 2018 2:30 PM - 4:30 PM

Pennsylvania Convention Center, 202-A
Hosted By: Labor and Employment Relations Association
  • Chair: Mark Price, Keystone Research Center

Retirement Adequacy and Wealth Distribution Among Early Savers

Jeffrey P. Thompson
,
Federal Reserve Board
Alice M. Henriques
,
Federal Reserve Board
Lindsay Jacobs
,
Federal Reserve Board
Kevin Moore
,
Federal Reserve Board

Abstract

The key financial resource that many households rely on in retirement are pension plans. These plans have drastically transformed over the past three decades and a large literature documents these changes and the possible effects on households' retirement wealth. While we have good information about what types of pensions households rely upon as they transition into retirement, we know less about how they arrive at that life event, how this path has changed over time as plan offerings and availability have evolved, and the implications for retirement preparedness looking ahead. In our research, we use the Survey of Consumer Finances to study the evolution of retirement wealth for cohorts that have begun their retirement planning (around age 40) -- and follow them until they reach the 'doorstep' of retirement. We build a measure of comprehensive retirement wealth (expanding on Delvin-Foltz et al, 2015), including wealth from DB plans and expected Social Security income for younger cohorts, to provide a broad picture of resources available. We then examine how the level and composition of these resources vary over time and across income, wealth, race, education groups, and expectations about retirement age. For some groups, the addition of Social Security wealth has a small effect on retirement wealth , while for many other groups, Social Security may be the primary source of income in old-age -- leading to little accumulation of any other retirement wealth.

Building Wealth While Balancing Paid and Unpaid Work

Christian E. Weller
,
University of Massachusetts-Boston
Michele Tolson
,
University of Massachusetts-Boston

Abstract

Wealth is unequally distributed by gender, with women having fewer saving than men throughout their working years and in retirement. While economists often look to economic risk in the financial market to understand this gender wealth gap, exposure to economic risk through the labor market and unpaid caregiving also impacts people's ability to build wealth. As labor market participation among women has increased, they have continued to have more responsibility for unpaid caregiving responsibilities than men. Along with being exposed to risks in an increasingly volatile labor market, women are disproportionately likely to have unexpected expenses associated with caregiving. Women's savings may suffer, since risk exposure associated with caregiving can be difficult to manage and - while potentially rewarding in other ways - is associated more with downside risk than upside economic gain.

This paper uses Survey of Consumer Finance (SCF) data from 1989 to 2016 to examine the link between caregiving responsibilities, labor market outcomes, and gendered wealth inequality.

Improving the Saver’s Credit for Low and Moderate Income Workers

Jennifer Erin Brown
,
National Institute on Retirement Security

Abstract

Even though many people think that the gig economy exclusively employs millennials, the next time you hail an Uber, request a Lyft, rent an AirBnB or purchase on Etsy, you are just as likely be served by a baby boomer than by a millennial. Why? Baby boomers suffered a one-two punch during the Great Recession, as they were laid off at unprecedented rates and were unable to regain long-term full-time employment, while their 401(k) plans and IRA accounts tumbled. Unwilling forced into 'early retirement,' these boomers have turned to the gig economy to make ends meet during their golden years. In particular, the fastest growing cohort of gig economy participants are women baby boomers, who rely on the gig economy to make ends meet or allows them to pay their mortgage.

This paper will summarize the growth of boomers in the gig economy using data from gig economy platforms and explore the reasons for their participation in the gig economy. Specifically, this paper will examine the assets of baby boomers (including retirement savings), the liabilities held by boomers (including mortgage debt, credit card debt, student loans, and other debt), and the income sources of baby boomers using the 2014 panel of the U.S. Census Bureau's Survey of Income and Program Participation.

Labor Unions and Wealth Inequality

David Madland
,
Center for American Progress
Alex Rowell
,
Center for American Progress
Christian E. Weller
,
University of Massachusetts-Boston

Abstract

Middle-class wealth is increasingly inadequate for long-term economic security and wealth inequality is growing. At the same time, union membership has declined, which can be a key source of economic security for many middle-class workers. This paper analyzes data from the Federal Reserve's Survey of Consumer Finances, or SCF, showing that unions can play a role in increasing wealth for middle-class Americans. The authors examine the link between union membership and household wealth from 1989 to 2013, finding that union status and wealth correlate with each other. The authors also use multivariate regression to understand whether these findings hold when controlling for other important demographic characteristics, such as age, race, ethnicity, gender, and family status. Union members generally have higher wages and better benefits than nonunion members, but these things alone do not explain why union members have more savings relative to their incomes than nonunion members. It is possible that stable union jobs that offer access to training and career opportunities, make it easier for middle-class families to plan for their future, and thus increase their savings. In that sense, union membership can create a virtuous cycle for middle-class stability.
Discussant(s)
Teresa Ghilarducci
,
New School
Kate Bahn
,
Center for American Progress
JEL Classifications
  • J0 - General