January 2021

New York during COVID-19

Struggling Workers’ Financial Woes Mount

The COVID-19 economy is really a tale of two worlds.

The stock market and housing market have largely shrugged off the economic slowdown. But severe financial problems are brewing for millions of workers who have lost their jobs or are earning less in a lackluster economy.

The assistance passed by Congress will certainly help. Still, half of all workers reported in a Transamerica Institute survey late last year that they are experiencing at least one employment disruption, whether a layoff, reduced work hours, shrinking paychecks and commissions, or an early retirement. A crisis also looms for thousands of renters if the Centers for Disease Control allows its eviction moratorium to expire at the end of this month.

Paying taxes is another big worry. When the pandemic struck and unemployment spiked last spring, the IRS postponed the deadline for filing federal taxes by three months, to July 15.

COVID-19 hasn’t gone away – and neither has concern about paying taxes. More than half of taxpayers said they might have to borrow money to pay their 2020 taxes this April, according to a LendEdu survey last month.

Other aspects of Americans’ financial problems were captured in two more surveys about the pandemic’s impact:

The Millennials who are still saddled with student loans have struggled for years to pay their other living expenses. The COVID-19 relief bill gave them a respite by suspending their monthly payments for most of 2020, and the U.S. Department of Education extended that at least through January. But one financial problem has been replaced by others for the young adults who are unemployed or earning less.

About one in five people in their late 20s and 30s reported in a 2020 survey by Georgetown University’s business school that the pandemic forced them to take a variety of stopgap financial measures. These have included dipping into retirement funds, delaying or reducing credit card payments, and getting food and rental assistance from non-profits. …Learn More

Is Job Automation Connected to Disability?

Grocery store clerk with a mask on

Manufacturing workers file more applications to the federal disability program than any other workers. What seems new is that jobs like administrative assistant and retail worker aren’t that far behind.

Is one possible explanation that the computerization of once-routine occupations like these plays a role in decisions to apply for disability benefits?

Consider the example of a retail worker with a bad back who is laid off, or perhaps she quits because she struggled to handle the cognitive challenges of increased automation. Even simple tasks such as processing customer transactions or locating a product at another store now require computer skills. And the worker’s skills may not match up with the technical qualifications needed to find a new job in a labor market where routine jobs are rapidly disappearing.

Given her disability, the worker might decide that her best – or only – option to ensure she has some income is to apply for disability benefits.

Job Automation ChartA study by Mathematica researcher April Yanyuan Wu did not find direct evidence that this skills mismatch triggers applications. But her findings suggest it might be a factor.

Wu provided new statistics on the types of jobs once held by disability applicants and on the changes over time in the job attributes, compared with the changes in job attributes facing the general working population.

Between 2007 and 2014, for example, the share of the applicants’ former jobs that required computer skills rose by 18 percentage points, outpacing the increase for the labor force overall. At the same time, jobs requiring moderate cognitive ability also increased more for people with disabilities than it did for all workers.

Stress is a telling indication of the challenges of increased job automation. The growth in high-stress jobs once held by people with disabilities was much larger than for workers overall, according to the study, which was funded by the U.S. Social Security Administration. …Learn More

House roof illustrations

Boomers Repairing their Mortgage Finances

The housing market collapse more than a decade ago inflicted a lot of financial damage on baby boomers nearing retirement. But a new study finds that some have been trying to make up for lost time by rapidly reducing their mortgage debt.

Since the Great Recession, the boomers who were born in the 1950s – they are now in their 60s – have paid down more than 40 percent of their remaining mortgages and home equity loans, on average – a much faster pace than their parents did at that age.

Not all the damage from the Great Recession can be repaired, however, because many people lost their homes in the wave of foreclosures. For example, the homeownership rate for the boomers born in the early 1950s quickly dropped slightly more than 10 percentage points after the housing crisis, to 67 percent, where it remained until 2016, the last year of data in the study.

Since then, the U.S. homeownership rate has increased but is still below the pre-recession peak.

The impact of the housing crisis was far less dramatic for Americans born in the early 1930s. Their homeownership rate dipped 2 percentage points right after the crisis, to a relatively high 76 percent, according to Jason Fichtner of Johns Hopkins University.

The decline in boomers’ homeownership leaves fewer of them with housing wealth to fall back on when they retire.

They have also fallen behind in fully paying off their mortgages, which would eliminate their monthly payments and make the house a low-cost place to live. Just half of the boomers born in the early 1950s who held onto their homes during the Great Recession own them outright – two-thirds of the people born in the early 1930s had paid off their mortgages by that age. …Learn More

Hands fighting over a rope

Top Economists Seek Solutions to Inequality

Something remarkable is happening in the economics profession. Top researchers in the field have begun arguing for policies to alleviate growing U.S. income and wealth inequality.

For decades, inequality wasn’t taken very seriously by economists. But that view “has changed dramatically,” said James K. Galbraith of the University of Texas at Austin, who moderated a Zoom panel at the annual meeting of the Allied Social Science Associations last week.

Inequality, Galbraith said, has “become one of the most important questions economists face.”

And COVID-19, argued Nobel laureate Joseph Stiglitz, a panelist, “has brought out very forcefully the nature of the inequalities in our society” and has “exacerbated those inequalities.”

The pandemic’s effects include larger increases in unemployment for low-wage workers, who are disproportionately Black and Latino and often work for small businesses devastated by efforts to suppress the virus. In addition, front-line workers like home health aides and meat-packing workers are being exposed to the virus but don’t always have paid sick time. There are also growing concerns about the longevity gap and about a widening educational gap between students from poor and high-income neighborhoods resulting from online learning.

The economists, having agreed inequality is a problem, identified the myriad forces driving it. They range from the persistent segregation of Black and white neighborhoods to the ability of the wealthy to invest and accumulate more wealth, while wage workers can barely get by. In a cutthroat global economy, the decline of unions has also stripped workers of their ability to bargain with employers for higher wages, they said.

Another panelist, Teresa Ghilarducci, brought attention to the inequality that exists among retirees. This can be seen in the downward mobility many people experience after they retire and can no longer support the standard of living they had while they were working.

To address these complex problems, the economists said a comprehensive policy agenda is needed that includes beefing up Social Security benefits – the great equalizer – for disadvantaged retirees, more taxation of inheritances, educational equality at the preschool through college levels, sturdier social safety nets, and new labor rules that give workers back some of the power they have lost.

Another panelist, Jason Furman, former chair of President Obama’s Council of Economic Advisers, agrees that an array of policies will be required to combat inequality. But he also argued that the two major relief bills Congress passed last year – a total of $2.9 trillion – probably reduce inequality. …Learn More

Alzheimer’s: from Denial to Empowerment

First came the denial.

Jay Reinstein

Jay Reinstein co-hosts a radio call in program every Tuesday.

Jay Reinstein’s unwillingness to accept that he had early onset Alzheimer’s disease was equal in magnitude to the responsibilities he would have to give up as the assistant city manager of Fayetteville, North Carolina. He was afraid the people working for him would judge him.

But disclosing his condition to coworkers was unavoidable. After Reinstein, who is 59, was diagnosed in March 2018, his doctor made this very clear: “You’re in a visible position and making decisions. You’ve got to tell them.” With encouragement from a therapist, Reinstein informed his boss, and together they mapped out a plan for telling the city’s elected officials and employees.

His disclosure wouldn’t be all smooth sailing. As news of his situation spread through City Hall, he felt hurt by the rumblings of some employees who felt he should leave immediately. What surprised Reinstein, however, was a feeling of relief after initially disclosing his condition to his direct reports during lunch at a local restaurant. “I felt the love, and people really cared. That made me confident that I knew I could tell others,” he said.

Seven months after his diagnosis, he retired – and he hasn’t looked back. Today, his daily schedule rivals that of, well, a city official.

Reinstein, who is now living in Raleigh, North Carolina, hosts a call-in radio program on Tuesday mornings to discuss issues involving race with his African-American co-host, Kevin Brooks, on WIDU 99.7 FM and 1600 AM. He relishes the challenge of doing research to prepare and even finds it therapeutic.

He is also one of two people with Alzheimer’s disease on the national board of directors for the Alzheimer’s Association, a role that includes occasional interviews with major newspapers. As a board member, he gets involved in strategic planning – just as he did in local government. Prior to joining the board, he spoke around the country on the organization’s behalf to put a public face on the disease and reduce its stigma.

Being around positive people “gives me a feeling there’s hope,” he said. “My philosophy is, I like to keep my brain busy.”

Bobbi Matchar, director of the Duke Dementia Family Support Program, says Reinstein is defying the stereotypes associated with Alzheimer’s. “Jay shows the world that it’s possible to have a joyful and meaningful life after being diagnosed with dementia,” she said – “and he does so with warmth, dignity, and enthusiasm.” …Learn More

2021 art

Our Popular Blogs in the Year of COVID

2020 was a year like no other.

But despite the pandemic, most baby boomers’ finances emerged unscathed. The stock market rebounded smartly from its March nosedive. And the economy has improved, though it remains on shaky ground.

Our readers, having largely ridden out last spring’s disruptions, returned to a perennial issue of interest to them: retirement planning.

One of their favorite articles last year was “Unexpected Retirement Costs Can be Big.” So was “Changing Social Security: Who’s Affected,” which was about the toll that increasing the program’s earliest retirement age could take on blue-collar workers in physical jobs who don’t have the luxury of delaying retirement.

COVID-19 in the nation’s nursing homes has caused incomprehensible tragedy. A nursing home advocate explained how this happened in “How COVID-19 Spreads in Nursing Homes.” And the mounting death toll in nursing homes surely confirmed a longstanding preference among baby boomers – as documented in “Most Older Americans Age in their Homes.”

Despite the economy’s halting recovery, layoffs due to COVID-19 still “may be contributing to the jump in boomer retirements,” the Pew Research Center said. Pew estimates that 3.2 million more boomers retired last year than in 2019, far outpacing the increases in recent years.

The layoffs have no doubt forced some boomers to start their Social Security earlier than planned, as explained in “Social Security: Tapped more in Downturn” and “A Laid-off Boomer’s Retirement Plan 2.0.” But unemployed older workers who are still too young for retirement benefits might apply for disability insurance, according to a study described in “Disability Applications Spike in Recession.”

Baby boomers hoping to ease into retirement on their own terms liked a pair of articles about ongoing research by Harvard Business School professor Teresa Amabile: “Mapping Out a Fulfilling Retirement” and “Retirement is Liberating – and Hard Work.”

Other 2020 articles popular with our readers included: …Learn More