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| Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis (Photo: Melisa Hom) |
NEW YORK, April 18, 2013 - A study from The New School’s Schwartz Center for Economic Policy Analysis (SCEPA) documents a downward trend in both employer sponsorship of retirement plans and employee participation rates in Connecticut from 1998 to 2012, making it increasingly difficult for workers to prepare for retirement.
In 2010, 50% of Connecticut’s workers – 740,000 residents – were not participating in an employer-provided retirement plan. The lack of access to retirement plans is falling for workers in almost all demographic and economic categories, including those nearing retirement and young workers, as well as those with middle and high income levels.
SCEPA’s research attributes the downward trend in workers’ financial security in retirement to two factors:
1. A Drop in Employer Sponsorship - From 2000 to 2010, the availability of employer-sponsored retirement plans in Connecticut declined by eight percentage points, from 66% to 59%. Four out of ten workers in the state do not have access to a retirement plan at work.
2. A Lack of Participation - Of the 59% of workers who had access to a retirement plan at work, 14% did not participate, either due to personal choice or structural rules that exclude part-time workers, those with under a year of service, or those under 25.
“The increase in the number of individuals without retirement accounts poses a danger to the broader economy, which will suffer the destabilizing effects of the mass downward mobility of seniors,” said Teresa Ghilarducci, New School economist and director of SCEPA,. “Now is the time for Connecticut and other states to take a lead in providing an option for all workers to participate in a retirement savings plan at work.”
The report broke down the trend by age, race, and industry:
• Sponsorship is decreasing fastest for lower-income workers, but those at all income levels are experiencing a drop in access. Lower-income workers saw a decrease in sponsorship rates from 46% to 31% over the ten year period. Workers in the middle 50% and top 50% income groups saw decreases of 8% and 7%, respectively.
• Workers between 55 and 64 had the largest drop in sponsorship - 15% - among all age groups surveyed. However, young workers (25-44) were close behind, with a drop in sponsorship of 13%.
• Asian workers lost the most ground with a 31% decline in sponsorship rates, almost triple the decline of 11% experienced by white workers and almost eight times the decline of 4% of black workers.
• Small firms have the lowest sponsorship rates, and this trend is accelerating in Connecticut. Of all firms, small firms with 1 to 24 employees showed the biggest proportional drop in sponsorship from 2000 to 2010. Sponsorship rates dropped from 34% to 27% in 2000, a change of 20%.
Connecticut’s State Senate Majority Leader Martin Looney (D-New Haven) introduced legislation, SB 54, to create a retirement savings plan for low-income workers in the private sector. Passed by the Joint Committee on Labor and Public Employees in March, it would create a retirement plan for all Connecticut workers without access to a retirement savings plan at work. The legislation is modeled after SCEPA’s proposal for state Guaranteed Retirement Accounts (GRAs), a plan that was recently enacted in California.
About the Schwartz Center for Economic Policy Research (SCEPA)
SCEPA is a leader in alternatives to mainstream economics. An economic policy think tank within The New School’s Department of Economics, our projects are designed to empower policy makers to create positive change. With a focus on collaboration and outreach, we provide scholars, non-profits and government officials with original, standards-based research on key policy issues. For more information, visit www.economicpolicyresearch.org.
About The New School
The New School, a leading progressive university in New York City, was founded in 1919 as a center of intellectual and artistic freedom. Today The New School is still in the vanguard of innovation and experimentation in higher education, with more than 10,000 undergraduate and graduate students in design and the social sciences, liberal arts, public policy, management, the arts, and media, and thousands of adult learners in continuing education courses. Committed to public engagement, The New School welcomes thousands of New Yorkers yearly to its celebrated public programs and maintains a global presence through its online learning programs, research institutes, and international partnerships. Learn more at www.newschool.edu.
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