(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Mark Miller
CHICAGO, Dec 8 The Great Recession took any
number of wrecking balls to the retirement security of American
workers, including wages and pension benefits, home equity and
savings. But one of the less understood areas of hurt continues
to this day: part-time work.
The recession pushed the U.S. part-time labor force to 20.1
percent in January 2010 from just under 17 percent, and it
remains high today at 18.3 percent of the workforce, according
to Bureau of Labor Statistics data.
New research from the Pew Charitable Trusts shows who that
trend is hurting most when it comes to saving for retirement:
young people, Latinos and African-Americans.
These workers tend to be employed in "lower-hour" industries
where part-time work is more prevalent, including retail trade,
arts, entertainment, recreation, hospitality and food service.
And they are far less likely to have a retirement plan - or
other benefits, such as health insurance and paid time off.
The availability of a workplace plan is a key component of
success in building savings for retirement. Often, enrollment is
automatic when workers start new jobs, as are the pretax
contributions that follow. "It's all about providing access,"
said John Scott, director of Pew's retirement savings project.
"For the most part, people take advantage of the opportunity to
save if it's easy."
For young people, lack of access is especially troubling
because getting an early start on retirement saving is the
financial equivalent of low-hanging fruit. The magic of
compounding means that early starters can do more with less,
accumulating savings with lower contribution rates.
For minority workers, the access problem is a key driver of
retirement security later in life - namely, the yawning racial
divide in retirement savings that has been evident for years.
Savings among nonwhite households near retirement (age 55-64)
average $30,000 - four times less than white households,
according to the National Institute on Retirement Security.
Pew's research, based on U.S. Census Bureau survey data,
found that 56 percent of part-time workers in lower hour
industries do not have access to a 401(k) or other retirement
plan, compared with just 29 percent of fulltime workers in
higher hour industries. And when a plan is offered,
participation rates also are lower than average for part-time
CLOSING THE GAP
The gaps affect millennials and minorities
disproportionately. Nearly 39 percent of millennials work in
lower-hour industries, compared with 20 percent of older
workers. Meanwhile, 28 percent of Hispanics and 26 percent of
African-Americans work in lower hour jobs, compared with 23
percent of whites.
The gaps could close somewhat if the economy continues to
expand, creating more full-time jobs in high-hour industries,
such as manufacturing, construction, technology, education and
healthcare. But policy advocates also have called for structural
changes to workplace savings plans to encourage higher coverage
rates for part-time workers.
A study by the U.S. Government Accountability Office (GAO)
published in October noted that even long-term part-time workers
can be excluded from retirement plans if they work less than
1,000 hours annually (about 19 hours weekly). The Obama
administration proposed in its 2017 budget to drop that ceiling
to 500 hours annually over a three-year period.
The GAO's study concluded that plan rules on eligibility and
vesting pose a significant barrier that should be tackled
through reforms of the Employee Retirement Income Security Act
(ERISA). For example, "last day" rules used by some plans
require workers to be employed on the last day of the year to
receive an employer match. And some plans prohibit participation
by workers younger than 21 years old.
GAO also urged Congress to consider re-evaluation of rules
on vesting in light of rising workforce mobility. The report
found, for example, that if a worker leaves two jobs after two
years, at ages 20 and 40, where the plan requires three years
for full vesting, the employer contributions forfeited could be
worth $81,743 at retirement (in future dollars).
Finally, improving overall availability of workplace saving
should be a priority, since roughly half of all workers have no
access to a workplace retirement plan. Some states, led by
California and Illinois, are creating their own programs for
uncovered workers that would require employer participation (reut.rs/2dAT4pW).
In September, the Senate Finance Committee sent legislation
to the full Senate (the Retirement Enhancement and Savings Act
of 2016) calling for changes to ERISA to allow employers from
different industries to band together to create "pooled plans"
as a way of reducing expense and administrative burdens of plan
If you are curious about how retirement coverage stacks up
where you work, check this interactive tool created by Pew