The following remarks were made by Algernon Austin, Director of the Race, Ethnicity and the Economy program at the Economic Policy Institute, on October 21, 2009 at the Re-Envisioning Retirement Security [1] conference.
America is becoming more racially and ethnically diverse with each passing year. When thinking about our retirement system, it is important to remember that people of color are less likely than non-Hispanic whites to be employed and more likely to be poor. In 2008, the poverty rate for adults 65 years old and over was 7.6% for non-Hispanic whites, 12.1% for Asian Americans, 19.3% for Hispanics, and 20% for blacks. This low-income and non-white population is a growing portion of the American public, and they will likely face an increasingly insecure in retirement if we don’t significantly reform the current system.
The fact that people of color are less likely to be employed than non-Hispanic whites and more likely to be poor means that a retirement program that assumes an income above the poverty level and a strong employment history will not be universal, secure or adequate for significant numbers of individuals of color. A program of this sort will also be inadequate for a large number of economically insecure whites and disproportionately for white women. Women, generally, earn less than men, are more likely to work part-time, to dropout of the labor force to raise children, and to outlive their retirement savings.
The current retirement system clearly does not serve these populations well.
- Low earners are less likely to be offered retirement benefits by their employer, and these benefits tend to be less generous.
- Low earners receive low or no tax breaks for contributing to retirement plans.
- When participation in retirement programs is voluntary, as it is in most 401(k) plans, low earners are less likely to participate.
- Low earners contribute a smaller share of their earnings, both because they have less disposable income and because they receive smaller tax breaks and employer matches.
- Finally, low earners are more likely to borrow or withdraw money from their accounts before retirement and—understandably—to invest more conservatively.
As prior speakers have shown, our reliance on employers to voluntarily offer retirement benefits leaves most workers behind, but disproportionately low-income and minority workers. We clearly need a system guided by the principles of the Retirement USA coalition.
We need to have a strong social security system along with a program like EPI’s Guaranteed Retirement Account plan. These two programs can do a great deal for retirement security. But I personally think that we also need a universally guaranteed a minimum income at the poverty level for all individuals who have a work history of low wages and inconsistent employment. We need to set a minimum floor below which none of the elderly will fall.