Around 50, U.S. Workers’ Earnings Fall

Here’s a sobering thought: by the time most workers get into their 50s, their earnings are declining.

Although older workers don’t necessarily see smaller paychecks, their earnings are effectively shrinking, because they no longer keep up with inflation, according to a study charting the inflation-adjusted, or “real,” earnings of some 5 million U.S. workers over their lifetimes.

The first decade in the labor force, between ages 25 to 35, is crucial – that’s where the wage gains are concentrated, the researchers find. Real earnings plateau sometime between 35 and 45, and this plateau occurs earlier than previous research had indicated. By the time most people move into the oldest age group in the sample – 45 to 55 – their earnings are falling.

The chart below shows the percentage changes during three discrete decades in the labor force for people whose earnings are in the middle of all U.S. workers’ earnings. For the 45-55 age group, other data in the study pinpoint the earnings decline as actually beginning around 50.

Economists have been refining their analyses of lifetime earnings patterns for decades. The researchers’ methodology improves on past techniques and then applies it to an extremely robust data set: the Social Security Administration’s earnings records for U.S. workers from the 1970s through 2011.

When they looked at all workers, they found that earnings, adjusted for inflation, rise by 38 percent over a typical person’s lifetime. But these lifetime patterns vary dramatically by a worker’s income bracket. …Learn More

job candidates

Employer Bias Against Aging Boomers?

joanna_lahey photoThe job market is improving, but more than half of baby boomers surveyed felt age discrimination “prevented them from working as much as they would like.” Squared Away interviewed Joanna Lahey, associate professor at Texas A&M University’s Bush School of Government and Public Service, who says age discrimination is extremely difficult to “prove.”

Many older workers have legitimate complaints about being discriminated against.  But what does the research tell us about how pervasive it is?

Lahey: Before I answer that, let me clarify something.  Older people who are working do well compared to younger workers.  On average, they have more money and stability. It’s the older job seekers whose experiences worry policy makers and researchers.

The bottom line is we really don’t know how pervasive age discrimination is, and there’s a lot of room for more research on this. In one experiment I did, younger workers were 40 percent more likely to be called back for an interview than older workers – but that was only women, and they were applying only for entry-level positions.

Age and experience are correlated with each other, so it’s really hard for researchers to tell if someone’s being discriminated against because of their age or because of some sort of mismatch between older workers’ more extensive experience and the job requirements.

The U.S. unemployment rate was a low 5.5 percent in March.  Doesn’t age discrimination fade when employers are hiring? …Learn More

nurses

Even in Nursing, Men Earn More

The nursing profession is predominantly women, but it’s the male nurses who earn more – $5,148 more per year on average.

“Male RNs out-earned female RNs across settings, specialties, and positions with no narrowing of the pay gap over time,” according to a salary comparison from 1998 through 2013 in the Journal of the American Medical Association. Other research has revealed pay gaps in teaching, another women-dominated profession.

Today is Equal Pay Day, and the media is replete with reminders that American women earn 77 cents for every dollar that men earn. Nursing is the single largest profession in the growing health care sector, and the pay gap affects some 2.5 million women employed in a profession established in 19th century London by Florence Nightingale, who wrote “Notes on Nursing: What It Is, and What It Is Not.”

The importance of a woman’s earnings level goes beyond the obvious implications for her current standard of living.  Earnings are also key to how much she can accumulate over a lifetime.

The largest pay disparity is for nurse anesthetists: men earn $17,290 more than their female counterparts. The only category in which women out-earn – by $1,732 – is university professors in the nursing field. The researchers isolate the role a nurse’s sex plays by controlling for demographic characteristics such as education level, work experience and other factors that also influence how much someone earns.  Only about half of the gap between men and women was explained by these identifiable factors, leaving half unexplained.

The chart below shows pay gaps, by type of nurse specialty.

Pay gap chartLearn More

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Retirement Coverage Expanded: UK vs US

President Obama signed a January memo officially launching his MyRA program to encourage saving by low-income and other Americans who lack a retirement plan through their employers.

The United Kingdom is also addressing pension shortfalls for uncovered workers in a much more ambitious way.  The U.K. program, put in place in 2012, has two key provisions that MyRA lacks: it automatically enrolls workers so more will save in the first place, and it provides them with matching contributions.

The U.K. program has enrolled 1.8 million of the 4 million workers targeted, primarily at small employers. A 2014 study by the Center for Retirement Research, which supports this blog, described the program and compared it with MyRA.

The United Kingdom’s retirement income problems largely stem from the contraction of the government’s retirement system.  A first stab at improving retirement income security came in 2001, when the government mandated that employers with five or more workers offer a low-cost retirement savings plan that workers could volunteer to join.  That program gained little traction among workers or financial firms.

The 2012 reform was much bolder.  In addition to mandating a 3 percent employer match (starting in 2017), the government matches 1 percent, with both matches contingent on the employee saving 4 percent of his earnings. To manage the program and offer a low-cost savings plan to employers, the National Employment Savings Trust, or NEST, was established. …Learn More

9 Measures of U.S. Economic Inequality

The interactive chart above illustrates the increasing U.S. disparity over the past 50 years between how much wealth the rich own – shown on the right side of the chart – and everyone else on the left.

The vast majority of Americans build wealth week by week, saving a little bit of their paychecks. Workers set aside wealth in less obvious ways too, by contributing some of that paycheck to Social Security and possibly paying down a mortgage.

Differences in earnings add up over a lifetime and contribute to how much wealth people are able to accumulate.  This is explored in the Urban Institute’s series of nine charts, including the one above. Take the earnings trend over a half century shown in Chart No. 2 on the Urban Institute’s website: the nation’s top-paid workers have enjoyed increasing incomes, while wages have essentially been flat for those at the bottom. [All income and wealth data are in constant 2013 dollars and are comparable.]

The charts, when taken together, also illustrate how much larger is the wealth disparity between the top and bottom than is the earnings disparity. This is especially true of racial inequalities, even when the researchers control for income and age.

In Chart No. 5 on the Urban Institute’s website, the total value of the lifetime earnings of the typical white baby boomer born between 1943 and 1951 is $2 million – 30 percent more than African-Americans’ lifetime earnings of $1.5 million.

The typical white American families’ retirement savings (Chart No. 7) is $130,472 – seven times more than African-American families at $19,049.   [Wealth data were provided only for families, not for individuals.] A report by the Federal Reserve Bank of St. Louis reached similar conclusions about the income and wealth gaps for black families.

To see all nine of the Urban Institute’s charts and its report, click here.Learn More

Photo of grads

Inequality Fuels Drop-Out Rate

Education is the holy grail of success.  But too many young men in this country don’t graduate high school, much less aspire to a college degree.

It’s clear that completing high school improves one’s chances of moving up the economic ladder.  So why doesn’t this incentive always work?

At a time of greater attention to the nation’s widening inequality, new research supports the argument that income inequality may actually discourage disadvantaged low-income teenagers from finishing high school.

The study examined whether there is a relationship between inequality and the drop-out rate, measuring inequality as the ratio of the lowest incomes in each state – the bottom 10 percent – to incomes in the middle.  The study found that drop-out rates for teenage boys in states with the greatest inequality were 4.1 percentage points higher than drop-out rates in the states with the least inequality – this is a big difference, amounting to more than one-third of the 11.1 percent average drop-out rate. …Learn More

Errors in Medical Bills Are Rife

Chart: Medical Debt ComplaintsEver try to make sense of a medical bill, with its co-payments, cost-sharing, and government or insurance-company reimbursements that haven’t been paid yet?  Hospital stays with multiple doctors and lab tests make billing even messier.

These layers of complexity contribute to errors and confusion that can damage Americans’ credit ratings.  Consumers “incur medical debts in collection without certainty about what they owe, to whom, when, or for what,” the federal Consumer Financial Protection Bureau (CFPB) reports.

When a hospital or physician hasn’t been paid, they may, after trying to resolve the issue in-house, pass the unpaid bill to one or a series of collection agencies.  Yet nearly one in four of the complaints consumers have made to CFPB about medical bills in collection said the debt “is not mine.” One in five said they’ve paid the bill being reported as past due.

There’s new evidence that the number of people reporting medical debt issues is declining, and new federal rules are aimed at curbing aggressive collection practices for low-income patients. But medical debt still accounts for half of the collections posted on credit reports and is the largest source of complaints about credit reports, exceeding complaints about utility and cable bills and retail and financial transactions. …Learn More

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