Posts Tagged "research"
June 14, 2022
Does Private Disability Affect Federal Rolls?
Economists have long thought that if employees have disability insurance on the job, they might never migrate over to the government’s disability rolls. A new study finds just the opposite.
In Canada, the existence of short-term disability in the private sector increased the number of people going into the national government’s program by 18,300 in 2015 and increased program spending by 5 percent, according to a researcher at the University of Toronto.
The logic behind this is that enrollment rises in the government program, which provides long-term benefits, because a negative incentive is at play. If employees with a disability or workplace injury have short-term coverage at work, they will have a regular source of income to tide them over while they apply for government benefits and wait for a response.
The Canadian study has implications for the United States, because the two countries’ programs are similar. The connection between U.S. government and employer disability is also of interest because some policymakers here would like to see mandates for employer disability become more widespread. Ten U.S. states and the District of Columbia currently require employers to provide the coverage for serious medical conditions.
This research adds a new voice to a lively debate on both sides of the U.S.-Canada border. Others have argued that when companies offer short-term disability, they prevent some people from going onto the government rolls by giving them time off to recover from an illness or injury before it becomes chronic. Employers also have an incentive to control their insurance costs by preventing injuries or accommodating employees with disabilities so they can keep working. …Learn More
May 26, 2022
Parents Work Less After Kids Leave Home
When children grow up and become financially independent, how do parents adjust their finances? Are they finally spending money on themselves? Saving more for retirement? Paying down debt?
No one has come up with a convincing answer yet. Especially puzzling is that past research has shown that parents seem to reduce their consumption after the adult children move out. Yet there’s no evidence that much of the extra money is going into 401(k)s. So what’s going on?
A new study for the first time finds a missing puzzle piece: parents, freed from the obligation to support their children, are choosing to work less.
Parents work one to two hours less per week after their adult children leave home for good, according to researchers at the American Enterprise Institute and the Center for Retirement Research.
Consistent with this finding, their household income declines roughly 4 percent because they’re working fewer hours or finding less demanding jobs with lower pay.
Reaching this conclusion required a series of steps. First, the researchers broadened the definitions of saving and consumption used in earlier studies to see if that shed any light on the issue. Finally, they looked at the parents’ decisions about work.
In the past, the estimates of saving had largely been confined to putting money in 401(k)s. Perhaps something could be learned by counting paying off a mortgage or other debts as a form of saving. But the researchers still found no evidence parents are paying their debts off faster after the kids leave.
So where is that extra money going? …Learn More
May 24, 2022
Americans Say They Need a Finance Class
For all of Americans’ financial shortcomings, at least we recognize there is a problem.
More than 80 percent of adults believe states should require a personal finance class in high school and wish they’d taken one themselves, according to a March survey by the National Endowment for Financial Education (NEFE).
Rarely do we see that much agreement on anything, and it indicates people don’t always feel confident about the choices they are making. A famous questionnaire takes the measure of their insecurity: less than a third of people surveyed correctly answered three basic questions about interest rates, inflation, and investment risk.
Of course, people over 60 have more experience, and 92 percent of them think financial education is important. But 79 percent of 18- to 29-year-olds also feel strongly that a financial class should be required for a high school degree. And both men and women agree.
Unfortunately, there hasn’t been much agreement on whether financial education actually does much good. NEFE would like to put forward some new evidence that it does work.
NEFE asked four economists to do a meta-analysis of 76 studies in 33 countries that tested the effectiveness of a wide variety of financial lessons at all ages. In one study, elementary students exhibited more self control after hearing stories that helped them visualize the future. One story was about a girl who explored, through time travel, a choice between buying things now or saving up for a bike. The researchers in another study described workers as effectively “flipping a coin” to decide between a 401(k)-style or Roth retirement account. But after watching videos about the accounts’ different tax consequences, they answered more questions about the accounts correctly.
May 12, 2022
Got a Retirement Plan? Race Plays a Role
The following statistic will sound familiar since I use it regularly: about half of U.S. workers are not saving enough and may see their standard of living drop when they retire.
A major culprit in this poor state of preparedness is that millions of Americans at any given moment don’t have a traditional pension or 401(k) savings plan at work.
A new study takes a close look at who these people are and shows stark differences along racial lines. A large majority of Hispanic workers in the private sector – two out of every three – do not have access to a pension or 401(k)-style plan, and more than half of Black workers do not have access. Although the numbers are lower for Asians (45 percent) and whites (42 percent), they are still substantial.
Other estimates of private sector coverage, also from this study by John Sabelhaus of the Brookings Institution, show big gaps between high- and low-paid workers and workers with and without college degrees, and at large and small employers.
Coverage also varies from state to state: In Pennsylvania, 41 percent lack access to a retirement plan, but in Florida, 59 percent do not have coverage.
Sabelhaus is certainly not the first to document disparities in retirement plan access for different demographic groups. But his methodology advanced the ball, resulting in more reliable estimates. By using three data sources, he could compensate for their shortcomings while taking advantage of the unique information in each one. He combined recent data from the U.S. Census Bureau, the IRS, and the Federal Reserve Board. …Learn More
March 15, 2022
High School Career Courses Keep on Giving
For young adults who don’t have a college degree, the career-oriented courses they took in high school give them a leg up in the job market. But do the benefits of higher-quality employment after high school continue into middle age?
The first known U.S. study to examine the long-term impact of high school curricula finds that career and technical classes produce workers who, even though they didn’t attend college, are employed at age 50 – even better if they also took Algebra 2 and other college-prep math courses.
To target the students who prepared themselves for better-paying jobs, the courses the researcher counted as career-oriented were business and marketing, health care, agriculture, and computer programming. Amanda Bosky at the University of Wisconsin excluded courses that tracked students into low-wage work like food service and childcare.
Career and technical courses improved the labor market standing of men and women, with subtle differences. For the women, the more career courses they took in high school, the more likely they were to be employed at age 50. The benefits held true regardless of the individual’s innate characteristics, which usually play a role in career success – from scores on standardized math tests to parents’ income.
For 50-year-old men, any amount of career and technical training improved their odds of continued work, according to the analysis, which used a survey of 1982 high school graduates that checked in on them again decades later. The students’ transcripts, detailing their coursework, supplemented the survey.
Although Bosky didn’t examine the types of jobs the older workers were doing, her premise is that it’s better to be employed than not in the years before retiring.
The findings have another important implication. Understanding what it takes for high school graduates to be engaged in the labor force at 50 is crucial at a time secure union jobs are being eliminated and the demands of a technology-based economy have increased. …Learn More
December 16, 2021
Medicaid to Help Fill Gap in Seniors’ Care
Two previous studies on long-term care reported in this blog estimated how many of today’s 65-year-olds today will require care for minimal, moderate, or severe levels of need as they age and how many have the financial resources to cover each level of care that might be required.
In the third and final study in this series, the Center for Retirement Research matched the specific levels of need each retiree is projected to have in the future with their resources to determine how many of them will fall short.
Among all retirees, 22 percent are expected to have minimal needs for care and 9 percent will lack the family and financial resources to cover it – in other words, just under half of the people in this group will fall short. The shortfall among people with moderate needs will be larger: the comparable figures are 38 percent of all retirees will be at this level and 21 percent of retirees will fall short. Finally, 24 percent of retirees are expected to have severe care needs – for at least five years – and 16 percent will fall short.
But there is another critical source of support: Medicaid. The researchers find that the joint federal-state program dramatically reduces the share of retirees with insufficient resources to cover their care.
Not everyone qualifies for Medicaid, however. Older Americans can get the funding if they meet two conditions. First, they must have a serious health issue, such as dementia or a physical or medical condition that limits their activity. Second, the program covers nursing homes only for retirees with little in the way of financial resources, either because they had lower-paying jobs and didn’t save or because they exhausted most of the retirement savings they had scraped together.
When Medicaid is added to the picture, the program makes a significant dent. Among the 65-year-olds who will need moderate care, the share of all retirees who lack the resources to cover it drops from 21 percent to 14 percent when Medicaid funding is included. Medicaid also reduces the burden on boomers who will need high levels of care: the share lacking adequate resources drops from 16 percent to 11 percent.
The researchers didn’t include Medicaid in the resources available to the 9 percent of retirees who will need only minimal help with chores like cleaning or grocery shopping. The program typically doesn’t pay for these services, though there has been movement in a handful of states and at the federal level to loosen the restrictions around housekeeping. …Learn More
November 18, 2021
The Economy, Minimum Wage, and Disability
The federal minimum wage is $7.25 an hour and hasn’t budged since 2009. But many states and some municipalities have raised their minimum wages. Today, more than half of the state minimums exceed the federal minimum.
Now a new trend has emerged: 19 states have enacted or approved automatic yearly increases in their minimum wages to protect their residents from inflation. These adjustments just went into effect this year in Arizona, Colorado, Maine, and Washington D.C.
How might higher minimum wages affect applications for disability insurance? On the one hand, the higher pay could prevent some people with mild disabilities from resorting to the fallback option: applying for disability benefits. But if small employers lay people off to cut costs or feel they can’t afford to hire workers at the new higher minimum wage, applications could go up. Facing fewer job opportunities, more low-wage workers might apply for benefits from a program that currently covers some 16 million Americans.
A new study finds that a rising minimum wage does, indeed, increase disability applications to the U.S. Social Security Administration. But the researchers stress that this impact is minimal compared with the increase driven by an economic downturn that throws more people out of work.
In their analysis of nearly 3,000 counties from 2000 through 2015, a one-dollar increase in the minimum wage added some 80,000 more applications to the disability program and its companion, the Supplemental Security Income program for the poor, elderly, and adults with disabilities. That represents a 2 percent increase.
Contrast that to the impact of a rising unemployment rate, which was about three times larger. …Learn More