June 3, 2021
Automation of Jobs Fuels Overdose Deaths
The rise in opioid addiction has created an epidemic of drug overdose deaths in the United States. But what increases the risk that people develop the disorder in the first place?
Automation of the U.S. economy turns out to be a contributing factor, as workers lose good jobs to industrial robots and despair about being disengaged from the labor force, conclude researchers at the University of Pennsylvania and Yale in a study funded by the U.S. Social Security Administration.
Manufacturing jobs, often in unionized industries, used to be a major route to the middle class. But millions of factory jobs disappeared as U.S. companies moved operations overseas. Compounding the job losses, corporate employers began installing robots in their remaining domestic operations. Automation was blamed in one study for eliminating more than 700,000 jobs and causing wage stagnation in the 1990s and early 2000s.
Prior research has connected the flight of manufacturing to increasing deaths from drug overdoses. Now, the new study specifically ties technology – measured as an increase in robots per 1,000 workers – to the increase in overdose deaths.
The men who are most affected by the rise of automation are in their prime working years, and they are concentrated in more industrialized areas. Automation accounted for nearly one in five of their overdose deaths in manufacturing counties. For women, automation was responsible for one in 10 overdose deaths in manufacturing counties. …Learn More
June 1, 2021
No-Benefit Jobs Better than Retiring Early
Many workers in their 60s lose some of their stamina. Either their bodies start showing signs of wear, or they don’t tolerate on-the-job stress like they used to.
People who find themselves in this situation but can’t afford to retire will appreciate the findings in a recent study: older workers who transition to a new job – and perhaps a less demanding one – have greatly improved their retirement finances, even if the new job lacks health and retirement benefits.
The starting point for the analysis was to identify 61- and 62-year-olds employed in career jobs and follow the changes in their retirement finances over time, as they break into three groups. Some retired, some remained in longstanding jobs with benefits, and some found no-benefit jobs, whether with an employer or as an independent contractor.
Matt Rutledge and Gal Wettstein at the Center for Retirement Research compared each group’s retirement prospects in their early 60s with where they ended up years later, after the majority of them had retired. The focus was on the people who, at 62, were falling short of what they would need to retire comfortably.
The financial assessments were based on so-called replacement rates – estimated retirement income as a percentage of employment earnings. The average target required for financial security in old age is about 75 percent of past earnings, though the precise number depends on how much the individual earned.
The researchers estimated replacement rates for the 62-year-olds who fell short of the targets and estimated the rates again when they were 67 or 68. Retirement security improved over time for the under-prepared people who continued to work – in contrast to an erosion in security for the people who, despite falling short, had retired at 62 and locked in a small Social Security check.
The most interesting finding concerned the older workers who had extended their employment by switching to no-benefit jobs. Their retirement income in their late 60s replaced 68 percent of their past earnings, on average – still less than what they need but up dramatically from 52 percent if they had retired early. …Learn More
May 27, 2021
Working from Home: the Next Inequity
An impressive consensus has emerged around the benefits of working from home.
More employers have come to accept the practice after being pleasantly surprised at how productive their employees are. If remote workers were once viewed as insufficiently committed to the company, they no longer feel as marginalized. And people seem to like it – with the notable exception of the mothers juggling Zoom meetings and childcare.
An NBER study out this month estimates that about 20 percent of the workdays in this country, post-pandemic, will be carried out at home. That’s less than half the at-home time that was clocked last year as the pandemic raged but is multiples of the very low levels prior to COVID-19.
There is “little doubt that the stigma associated with [working from home] diminished during the pandemic,” concluded the study, based on a series of surveys last year. This seismic shift in workplace conventions “will stick long after the pandemic ends.”
But a second theme running through this research is just as important: the benefits of telecommuting flow mainly to the more educated, higher-paid labor force.
More than 50 percent of U.S. workers earning more than $100,000 a year have been allowed to work at home, rather than in the office, giving them more protection from layoffs during the economic shutdowns and from COVID-19. On the other end of the spectrum are lower-paid and minority workers, who have been much more likely to lose their jobs and be exposed to the disease. Just 25 percent of employees earning under $50,000 work at home – and only 10 percent of the lowest-paid workers who didn’t complete high school work.
Yet the desire to work at home is pervasive. Regardless of their income, years of education, or family situation, workers view it as a perk – so much so that most people said they would accept a pay cut if they could work remotely two or three days a week.
Another potential impact on equity in the study is the effect of remote work on commerce in the urban centers. …Learn More
May 25, 2021
Retirees Intent on Leaving Homes to Kids
Every year, older homeowners leave billions of dollars worth of the wealth locked up in their houses to their adult children.
This is a paradox if one considers that home equity is one of retirees’ primary assets and could be a crucial source of income for people who are “house rich and income poor.” Retirement experts searching for an explanation have long wondered whether the deceased had intended to leave the house to family or simply died before they were able to cash in on the equity and spend it.
A new study has an answer: retirees have every intention of letting family members inherit their homes. The people in the study who expressed a stronger desire to leave an inheritance of at least $10,000 were much less likely to sell their homes before they died – with the intention that the house would be part, if not all, of that inheritance.
The foundation for this study is a precise estimate of the housing decisions being made in the final two years of life from a survey of older Americans. The researchers counted as many people as possible, including the deceased – their final living status came from interviews with next of kin – as well as people who continued to be homeowners after going into hospice or a nursing home.
The homeownership rate in the older population peaks around age 70 and starts falling precipitously after 80. But when the elderly in the study died, about half of them still owned their homes, while the other half had sold them and moved into rental housing.
At younger ages, the retirees had been asked to estimate the probability, from 0 (no chance) to 100 (definitely), that they would leave a financial inheritance. Based on this information, the researchers found that those who had said they had a high probability of leaving an inheritance remained in their homes.
There is also a financial advantage to the owner of not selling the house to avoid the capital gains tax, especially if the price appreciated dramatically during their lifetimes. The researchers didn’t account for this incentive in their analysis.
But they did find that the desire to leave a bequest is so compelling that parents held on to their homes even after predicting they might need to pay for nursing home care within a few years. …Learn More
May 20, 2021
Black Millennials’ Wealth is Sliding
It’s still too early to assess the full impact of the COVID-19 downturn on Millennials’ economic fortunes. But Black Millennials had already lost a lot of ground before the pandemic hit their communities hard.
Their wealth in 2019 was just half of what would be expected based on how much wealth their parents’ generation had at the same age.
Other Millennials are also running behind previous generations, but only slightly. And their situations have improved in recent years, while Black Millennials are sliding farther and farther behind.
The Federal Reserve Bank of St. Louis called the situation “alarming” in its new report.
The oldest Millennials are turning 41 this year. But in 2019, the typical Black family born in the 1980s had only $5,000 in their savings accounts, 401(k)s, home equity and other wealth – compared with the roughly $11,000 they would be expected to have based on the previous generation. Hispanic Millennials had $22,000, and whites had $88,000.
Black Millennials are struggling for a few different reasons, said Ana Hernández Kent, a senior researcher for the St. Louis Fed’s Institute for Economic Equity. Homeownership is a major source of wealth for most Americans, but only a third of them own homes – half the rate of their white peers.
Student debt is another big issue, because African-Americans who borrowed money for college either didn’t graduate or used the loans to attend lower-quality for-profit colleges at disproportionate rates. Their college experiences haven’t always translated to earnings that are high enough to justify the debt taken on to pay for an education.
“They’re over-leveraged,” Kent said. “Just over a third of Black Millennials with at least a two-year degree are more likely to say the costs of college are larger than the benefits.” …Learn More
May 18, 2021
Nearly Half on Disability Want to Work
An unfortunate misperception about people on federal disability is that they’re not interested in working. In fact, nearly half of them want to work or expect to go back to work, and that share has been rising.
But getting or keeping a job has proved difficult, and the employment rate is very low for people who get Social Security disability benefits – or cash assistance from a companion program, Supplemental Security Income (SSI). Yet the vast majority of beneficiaries have past work experience that should help them in the job market.
Researchers at Mathematica mined a survey of people on disability for clues about how to help them find a job or promotion or learn a new skill.
Many of these work-oriented individuals are under extreme financial pressures and are also younger and healthier, despite their disabilities, than the people on disability who didn’t express a desire to work.
Yet only a third of the 2.6 million beneficiaries in the new study who say they want to work are either working now, were recently employed, or are looking for a job.
So, if they are willing to work and feel able to work, why are so few of them in the labor force?
The researchers landed on two big reasons. First, the work-oriented individuals, despite their desire to work, said they can’t find a job. This is a common experience because employers are either reluctant to hire people with disabilities or the available jobs don’t accommodate them. Others are hesitant to try the job market again because they feel discouraged by past employment experiences.
May 13, 2021
Tapping Home Equity – Retirees’ Relief Valve
One telling indication that retirees are in serious financial straits is when they take less of their medications or don’t fill prescriptions.
Nearly one in four low-income retirees has difficulty paying for medications, despite passage of Medicare Part D in 2006, which reduced out-of-pocket drug costs. Between 2011 and 2015, the average Medicare beneficiary spent $620 to $700 a year on prescriptions, and people with diabetes, lung disease, and cardiovascular disease spent more than $1,000 a year.
One way retirees can address such hardships would be to tap some of the equity in their homes. Although a homeowner probably wouldn’t use this strategy just to cover drug copayments, new research finds that older Americans who tap equity significantly increase their adherence to their medications – and this finding has broader significance for improving their retirement security.
Most older homeowners are, on the one hand, reluctant to pull cash out of their homes – often their largest asset – through a home equity loan, mortgage refinancing, or reverse mortgage. Yet many of them don’t have enough income to live comfortably and could put this asset to good use to reduce their debt or pay medical bills if they become seriously ill.
To test how home equity might help retirees, the researchers used a series of surveys between 1998 and 2016 that have data on older people’s finances and ask whether, at any time in the past two years, they took “less medication than prescribed … because of the cost?” The analysis controlled for various influences on financial well-being, including education, marital status, and cognitive health, as well as financial resources.
Extracting home equity improved adherence to medications in the short term, particularly for homeowners over 65 who have little wealth outside of their homes. Separately, the researchers showed that retirees who tapped home equity were significantly more likely to take their medications at a critical time – after experiencing a serious illness.