Column: How part-time
work hurts U.S. workers' retirement security
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[December 08, 2016]
By Mark Miller
CHICAGO
(Reuters) - 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.”
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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 workers.
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.
![](http://archives.lincolndailynews.com/2016/Dec/08/images/ads/current/fricke_christmas_sda.png)
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![](../images/120816pics/busine30.jpg)
A cashier holds hundred dollar bills up to the light on the
Thanksgiving Day holiday in Manchester, New Hampshire November 22,
2012. REUTERS/Jessica Rinaldi
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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
(http://reut.rs/2dAT4pW).
![](http://archives.lincolndailynews.com/2016/Dec/08/images/ads/current/eaton_christmas_lda_2015.png)
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
sponsorship.
If you are curious about how retirement coverage stacks up where you work, check
this interactive tool created by Pew ((http://bit.ly/1Ps88zT), which lets users
visualize retirement plan access and participation rates by a variety of
factors, including age, gender, state, income level and industry.
(The opinions expressed here are those of the author, a columnist for Reuters.)
(Editing by Matthew Lewis)
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