The Bureau of Labor Statistics released its latest labor market data on October 5. The overall numbers look good. The labor market added 134,000 new jobs in September 2018, continuing a record streak of job creation, and the unemployment rate fell to 3.7%.
Yet, the data also show persistent trouble spots that can make it harder for some people to save for retirement than for others. Importantly, since labor market weaknesses are unevenly distributed by race, ethnicity, education and gender, they underscore the challenges in addressing the retirement crisis.
Saving at work is still one of the key ways for people to build retirement savings. First of all, people need to have a job and often need to be in that job for some time to even get access to an employer’s retirement benefits such as 401(k) plans. Then, people need to have earnings to contribute to a 401(k) account. And, people need to stay in a job for some time and regularly contribute to their 401(k)s to reduce the risks of investing.
Yet, on all of these measures – unemployment, wages and job stability – the labor market data show large inequities by race, ethnicity, education and gender. These persistent labor market gaps then translate into widespread wealth and retirement income inequality.
Take the employment shares of different population groups. A smaller share of African-Americans, for example, are employed – 58.7% — compared to 60.6% of whites. And, while a larger share of Hispanics are employed than is the case for whites, their unemployment rate is also higher with 4.5% compared to 3.3% for whites. Moreover, the employed share of women is much lower than that of men. Furthermore, employment opportunities go up with education. The employed share of people with at least a bachelor’s degree was 72.1% in September 2018, while the employed share of people without a high school degree was only 43.5% at the same time. Gaps in job opportunities then mean large differences by race, gender and education in the chance of having access to a retirement plan at work.
Wage gaps further exacerbate the differences in job opportunities by race, ethnicity, gender and education. African-Americans had median usually weekly earnings of $683 and Hispanics had earnings of $674, while whites earned $907 in the second quarter of 2018. Moreover, full-time employed women had median usual weekly earnings of only $779 at the same time, compared to $962 for men. And, those without a high school degree typically earned $554 when working full-time, while those with at least a bachelor’s degree earned $1,310 in the second quarter of 2018. Substantially lower earnings for people of color, women and those with less education, even when people work full-time, translate into fewer retirement plan contributions, even if people participate in a retirement plan.
But, gaps in employment opportunities and wages are not the end of the story on retirement inequality. People of color, women and those with less education tend to have less job stability than whites, men and those with more education. For example, they typically have more time on the job with their current employers. And, African-Americans and those with less education tend to be out of jobs longer, when they are unemployed, than is the case for whites and those with more education. In September 2018, for example, the average length of unemployment for African-Americans was 30.3 weeks compared to 24.2 weeks for whites. Less job stability can make it harder for people to qualify for a retirement plan at work as employers often require a minimum number of years before people can get full benefits. And less job stability can make it harder for people to prioritize their long-term finances if they have to worry about their current job situation. They then forego retirement savings all together.
Saving for retirement depends a lot on how well one fares in the labor market. Yet, job opportunities, wages and job stability are not evenly distributed. Typically, labor market outcomes are worse for African-Americans and Hispanics than for whites, worse for women than for men, and worse for those with less education than for those with more education. These persistent gaps apparent in the labor market translate into widespread differences in retirement preparedness by race, ethnicity, gender and education. Only a strong labor market with well-paying, stable jobs for all will eventually help to shrink the massive gaps in retirement savings.
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