Women of Color Go into Construction Trades

women for color in construction figureThe annual pay for a plumber in Omaha, Nebraska, with three years of experience is around $55,000 a year, while a certified nursing assistant there earns $30,000. Or compare an electrician in the Phoenix area making $62,000 to $39,000 for a dental assistant.

Recognizing that many of the occupations dominated by women don’t pay well, young women of color are increasingly moving into the construction trades. Black, Latina, and Asian women and women of mixed race account for 45 percent of the 308,000 women working in the trades. This exceeds their 38 percent share of the women’s labor force overall, according to an analysis of 2016-2018 data by Ariane Hegewisch of the Institute for Women’s Policy Research. The largest group is Latina women.

Women of color are gravitating to construction jobs – carpenter, electrician, laborer, plumber, mason, painter, and metal worker – because they offer paid apprenticeships, good pay, and benefits to workers who don’t have a college degree. The International Union of Painters and Allied Trades even has maternity leave.

woman cutting woodBeing a sheet metal worker has “given me the financial ability to take care of my family,” Monica Yamada, a member of Local 104 in San Francisco, said in a recent webinar hosted by the policy institute and Chicago Women in Trades.

But working in a man’s world is challenging. Women say they often feel marginalized or harassed, or they receive fewer opportunities for career-advancing training or assignments at the construction site. “Women must fight to advance and to learn new aspects of the trade that men automatically get to do,” said the institute’s study director, Chandra Childers. …Learn More

College grad drowning

A Lot of Student Debt May Never Be Paid Off

student loan chartFor half to two-thirds of the college loans made over the past decade, the former students owe more than they initially borrowed.

This is the result of a federal program that bases monthly student loan payments on the borrowers’ income if they aren’t earning enough to afford the standard payments. But the monthly payments in these much-needed Income Driven Repayment (IDR) plans are often less than is required to fully service the principal and interest on the loans. So instead of getting ahead, borrowers are perennially behind and never chip away at the balances.

People who go into the repayment plans are “trying to bail out a boat with a bucket that has a hole in it,” said Betsy Mayotte, president of The Institute of Student Loan Advisors, a non-profit that gives free information and advice to people needing help with their loans.

Marshall Steinbaum, an economist with the University of Utah, estimates that at least half of all student loans might never be repaid, based on his back-of-the-envelope calculation. That share is also growing, he said in an email, because more and more former students are enrolling in IDR programs.

The inability to pay “is baked into the system,” Steinbaum wrote in The Appeal. …Learn More

The Cares Act

Wisconsin Finds Owners of Lost Pensions

Some people lose old retirement accounts because they forget about them. Others don’t want the hassle required to retrieve small amounts. And workers who change jobs fairly often can leave a lot of small accounts in their wake.

As a result, millions of dollars of retirement wealth – in pensions, 401(k)s, IRAs, profit-sharing plans, and annuities – sit in state repositories of unclaimed property.

So how can workers and retirees be united with their long-lost money?

To answer this question, a new study contrasts what has happened to unclaimed retirement accounts in two states with vastly different approaches to handling them: Wisconsin and Massachusetts.

Wisconsin in 2015 began to use Social Security numbers to automatically match up and return misplaced retirement accounts to their owners. As long as the account has a Social Security number attached to it, the state can find a resident’s current contact information in Wisconsin’s taxpayer records.

Under this system, two-thirds of the accounts were returned in 2016 and 2017, the researchers found.

Over the same two years in Massachusetts, only 3.4 percent of unclaimed retirement accounts were returned to their owners. Massachusetts takes the same passive approach used in most states: individuals must initiate the process by locating an account in the state’s unclaimed property database and then retrieve it themselves.

The University of Wisconsin study also uncovered an explanation for why some people are motivated to track down accounts on their own. …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

Tax Form 1040

How Much Will Your Retirement Taxes Be?

Four out of five retired households will pay little or no income taxes. But the tax rates at the highest income levels are meaningful, averaging 11 percent of household income and as much as 23 percent at the very top.

These estimates come from a new analysis by the Center for Retirement Research that sheds light on a potentially important consideration that is often overlooked by people approaching retirement age.

The highest tax rates are paid by the highest-income households because they often withdraw money from 401(k)s and IRAs to supplement their Social Security benefits. They must also pay capital gains taxes when they sell stocks and bonds for a profit from their regular financial accounts.

Retirement Taxes ChartHouseholds with income in the top 20 percent have nearly $770,000, on average, in retirement savings and other financial assets – their taxes equal 11 percent of their total retirement income. However, limiting the households to the top 5 percent of the income distribution, the tax rate increases to 16 percent – and the top 1 percent pays 23 percent.

These estimates assume retirees start pulling money out of their taxable 401(k) and IRA accounts when the IRS’ required minimum distributions (RMDs) kick in at age 70 1/2 – this age will increase to 72 next year. The tax rates were very similar under alternate scenarios that assume retirees either start withdrawing savings prior to the RMD or buy an immediate annuity with a survivor’s benefit.

The tax estimates are based on data for older U.S. households with at least one recent retiree. The researchers first calculated their expected future lifetime income from Social Security, 401(k)s and other sources in each year. The future yearly tax payments were then estimated using a program that applies IRS rules and each state’s tax rules to the various types of retirement income.

The tax rates are their total tax bills as a percentage of their total income. …Learn More

High Fees Tied to Mutual Fund Complexity

When David Marotta is investing his clients’ money in mutual funds, he scrutinizes the fees.

SP500 Index FundsTo demonstrate why fees are so important, Marotta charted the fees and 10-year returns for dozens of index funds in the Standard & Poor’s 500 family. Since these funds all track the same index and their performance is roughly the same, the fees will largely determine how much of the return the investor keeps and how much goes to the mutual fund company.

“The larger the fee the less that it performs. It’s kind of a straight line,said the Charlottesville, Virginia investment manager. “Anytime we’re picking a fund” for a client, “we’re trying to find the lowest-cost fund that we can find in that sector.”

The fees for the S&P 500 index funds he analyzed using Morningstar data ranged from one-tenth of a percent to 2.5 percent of the invested assets.

The issue of fees versus performance is more complicated for actively managed investments, which sometimes have strong returns that justify paying a higher fee. But in any investment, the true measure of how it’s doing is the after-fee return.

However, deciphering mutual fund fee disclosures can be extremely difficult for do-it-yourself 401(k) and IRA investors – and that is by design.

An analysis of S&P 500 index funds identified numerous narrative techniques in mutual fund documents that confuse investors. The researchers – from the University of Washington, MIT, and The Wharton School – evaluated each fund’s disclosures and showed that funds with more complex explanations of their investment holdings and fees also have higher fees. The researchers call this “strategic obfuscation.”

The study, which covered the period from 1994 through 2017, illustrated this complexity with two firms’ descriptions of their S&P 500 index funds. Schwab’s one-sentence summary gets right to the point: “The fund’s goal is to track the total return of the S&P 500 index.” This fund’s annual fee is 0.02 percent of the assets.

Deutsche Bank’s disclosure is more complicated for a few different reasons. First, the summary is three paragraphs and starts this way: “The fund seeks to provide investment results that, before expenses, correspond to the total return of common stocks…” …Learn More

Does Retiring Cause Memory Loss?

After four or five decades of work, retirement is liberating! It’s gonna be great! Right?

Well, not necessarily. It depends on how you retire.

In this video, Ross Andel, director of the School of Aging Studies at the University of South Florida, warns that a risk to retiring is that it can “speed up the aging of our brain. It could make us slower and more forgetful.”

His research demonstrates how work and retirement influence brain functioning. He tested the memories of people in their early 60s living in Canberra, Australia. Every four years, they were asked to remember as many random and unrelated words in a list as they could.

Naturally, they couldn’t remember as many words at 74 as at 62. “This is quite normal,” he said.

More interesting was what Andel found when he separated the test results for the retirees from the results for the older individuals who were still working. The decline in memory was almost exclusively among the retirees.

“Something seems to happen around the time of retirement to make people more forgetful,” he said.

Andel isn’t recommending that you work until you drop. He does provide a roadmap for limiting memory loss so you can enjoy retirement.

To find out what he has in mind, you’ll have to watch the video. …Learn More