Explaining the Recent Decline of Retirement Plans
[We’re pleased to welcome Teresa Ghilarducci of The New School for Social Research. Teresa published an article in ILR Review, entitled “Explaining the Decline in the Offer Rate of Employer Retirement Plans between 2003 and 2012” with co-author Joelle Saad-Lessler of The New School for Social Research.]
This study is the first to focus on how changes in worker bargaining power explains the national decline in employers offering retirement account plans to their employees. The study finds that, as expected, the declining bargaining power of workers is the main reason employers are less likely to offer their workers access to retirement plans. This finding should initiate a discussion about the responsibility of employers to help workers save for retirement in a system where Americans are expected to save in private accounts.
The abstract for the paper:
Workplace retirement plans (deferred compensation plans [DCs] and deferred benefit plans [DBs]) help workers save for retirement conveniently, consistently, and automatically. But the percentage of firms offering retirement accounts is steadily declining. Between 2001 to 2003 and 2010 to 2012, the retirement plan offer rate of firms dropped from 63 to 55%. The drop is driven by a decline in both DCs and DBs. Using a probit model and an Oaxaca–Blinder threefold decomposition technique applied to data from the Current Population Survey (CPS) for 2001 to 2003 and 2010 to 2012, and using longitudinal analysis of the Survey of Income and Program Participation (SIPP) 2008 panel waves 3 and 11, the authors find that the labor-contracting environment dominates individual- and firm-level variables in explaining whether employers offer a retirement account to their workers. Therefore, attempts to raise retirement account offer rates must address the decline in workers’ bargaining power and the changes in norms relating to provision of benefits. This study contributes to the important discussion about trends in DC and DB coverage and the decline in retirement security.
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Teresa Ghilarducci is an economist, author, and labor economist, and retirement security expert. Her widely circulated New York Times op-ed “Our Ridiculous Approach to Retirement” brought attention to her fresh and comprehensive critique of the America way of provisioning for retirement. Her book, When I’m 64: The Plot Against Pensions and the Plan to Save Them, presents her cutting-edge policy recommendations for restructuring the United States’ deteriorating retirement income security system. Her book Labor’s Capital: The Economics and Politics of Employer Pensions won an Association of American Publishers award in 1992. For the past five years, she has served as a court appointed trustee of the $50 billion retiree health care fund for ford, GM, and Chrysler retirees. Before coming The New School she was a professor at the University of Notre Dame. Dr. Ghilarducci was the 2006–08 Wurf Fellow at Harvard Law School; her research has been funded by the Rockefeller Foundation, the Alfred P. Sloan Foundation, U.S. Department of Labor, Ford Foundation, and Retirement Research Foundation.
Joelle Saad-Lessler is an economist with extensive experience in econometric modeling, statistical programming, and data analysis. She completed her PhD at Columbia University, and worked as an assistant professor of economics at Long Island University for eight years. Her research work is predominantly applied in nature, with a focus on the economics of immigration. Her publications span a range of issues, from the impact of immigration on local wages, to the economics of international child labor, and the economic impact of global warming.
