Despite America’s vast wealth, more than 15 million older Americans—one-third of people ages 65 and older—are “economically insecure,” meaning they are poor or near-poor, according to the National Council on Aging. Half of all Black and Latinx people ages 65 and older are in this precarious situation, and older women are especially likely to be poor.
These financially fragile older Americans “struggle with rising housing and health care bills, inadequate nutrition, lack of access to transportation, diminished savings, and job loss,” the council wrote, and are just “one major adverse life event” away from even more severe trouble.
Among the world’s rich nations in the Organization for Economic Cooperation and Development (OECD), the United States has the highest rate of elder poverty. More than one in five elders in the United States (21%) are poor, according to OECD poverty measures—far exceeding the OECD average of less than 12%.
One way out of poverty is work, so combined with demographic changes and desperation for more income, it’s no surprise that the fastest-growing portion of the labor force are people ages 55 and older. Following “overblown” reports of a retirement wave (aka, “the great resignation”), The New York Times reported, millions of older Americans have “unretired” and returned to work—employment among those ages 55–64 has recovered more heartily than for other age groups. Yet, those numbers don’t come close to the 1.3 million workers ages 50 and older who lost their jobs in the pandemic.
Despite those mass layoffs of older workers, America’s older adults work more than any of their counterparts in rich OECD nations. Put together, high rates of elder poverty and labor force participation speak volumes and raise questions about how the United States values workers and retirement. Why are so many older Americans poor or on poverty’s precipice, compelled to keep working in old age? And what can we do to prevent these inequities? The aging of America and its workforce suggests that parts of the U.S. economy benefit from elder poverty, precarity and economic insecurity, while workers and elders suffer.
The rise of the elder class of poor and near poor is directly related to the demise of unions and pensions, and the shriveling of the minimum wage.
The rise of this elder class of poor and near poor—those who are too old to work but must work anyway, and those who have been pushed into retirement without enough to live on—is directly related to the demise of unions and pensions, and the decades-long shriveling of the minimum wage. It’s also tied to the rise of industries and companies that depend upon low paid labor, such as Amazon, Walmart and the homecare and personal-healthcare sectors.
This growing trend of companies profiting from older workers is especially worrying. In some sectors we are seeing the effects of the political economy of structural ageism—evidenced not only by discriminatory employment practices but by companies profiting from older workers’ economic precarity. As Michael Adams explained in Generations Now, “Ageism is rooted not only in personal experience, but also in systems and structures that essentialize youth, while marginalizing and disempowering elders. To be anti-ageist means focusing on power structures, social justice and advocacy.”
The ill treatment of older workers is not the result of pre-market bigotry and false assumptions about older workers but part of a profitable business model to take advantage of the desperation of older workers so some industries can create a low-paid and reliable workforce.
“With steadily rising life expectancy and the collapse of private-sector pensions, more and more U.S. workers are remaining in the labor force well beyond the traditional retirement age of 65,” wrote Professor Ruth Milkman, chair of Labor Studies at the City University of New York.
A larger restructuring of work has also taken its toll. Milkman charted the rise of nonstandard work arrangements among older workers, exacerbating inequities and elder precarity, and noted, “The highest prevalence and the fastest growth of AWA [alternative work arrangements] concentrated in the age group of 55 to 75.”
Minimum Wage Shrinks
One reason why so many elders are poor is the shriveling value of the federal minimum wage—a precarious bottom floor through which many workers fall into poverty. America’s lowest-paid workers haven’t gotten a raise since 2009, and despite progress in many states and cities, more than 1.1 million workers make at or below the miserly minimum of $7.45 an hour.
Worse, the wage’s real value has plunged 24% since 1968. As economist Dean Baker has calculated, if the minimum wage kept pace with U.S. productivity rates since 1968, all workers would make a bare minimum of $21.50 per hour. Prior to 1968, according to Baker, the minimum wage kept pace with inflation and productivity increases.
Raising this frozen minimum wage to a modest $15 per hour would lift millions of workers out of poverty, analysts at the Economic Policy Institute have found. Boosting wages at the bottom of the economy would help these workers stabilize their lives and help them build toward an economically secure future.
As the Urban Institute explained, the frozen minimum wage and wage inequality have long-term ramifications for retirement and old age. These inequities, rising since 1970, “shape workers’ lifetime earnings and affect the distribution of retirement income,” the Institute found. “People who experience high wage inequality during their working years are likely to experience high retirement income inequality, because Social Security benefits are tied to lifetime earnings, and people’s ability to save for retirement depends on how much they earn.”
Compounding this reality, 40% of America’s older adults rely solely upon Social Security to survive, according to a report by the National Institute on Retirement Security.
A major force undermining elders’ economic and retirement security is shrinking pensions, which have been declining in quantity and quality for decades. Under policy and economic shifts since the 1980s, pensions have morphed into individual, self-directed, commercial 401(k) and Individual Retirement Accounts, for those who have them—and less than half the workforce has any workplace retirement plan at all. Individual accounts are poorly managed, earn a smaller risk-adjusted rate of return, and are less guaranteed and funded than traditional pension plans. The decline of these more secure and generous workplace pension plans—called defined benefit (DB) plans—undermines elder security and compels many to head back to work.
In 2008, only 20% of private-sector workers had stable DB plans, down from 38% in 1980. As of 2018, just 22% of workers participated in a DB plan, while 42% were in a defined-contribution (DC) plan, according to the Bureau of Labor Statistics. By 2020, both DB and DC retirement coverage has been falling and is lower among nonwhite and low-income workers, research by the New School’s Schwartz Center for Economic Policy Analysis (SCEPA) showed.
'Less than half the workforce has any workplace retirement plan at all.’
The shift to market-driven DC plans, explained economist Monique Morrissey, of the Economic Policy Institute, means “we went from a system where the employer in the private sector paid for the entire pension and took on all the risk to a system where the worker in the private sector took on most of the cost and all of the risk.”
Declining coverage in any type of plan weakens worker bargaining power. As the Department of Labor acknowledged, reductions in “Social Security benefits and employee retirement plans, along with the need to save more for retirement, create incentives to keep working.” Needing to work without a fallback income means elders are less able to command pay and working conditions on their terms.
Worker Power Slips
In a noteworthy March 2022 report, the Treasury Department documented declining labor power due to increased market concentration and “monopsony” conditions, in which a small handful of powerful employers control the terms of employment. As the Treasury explained, “Concentration in particular industries and locations can lead to workers receiving less pay, fewer benefits, and worse conditions than what they would under conditions of greater competition.”
More concentrated and less competitive markets “often fall hardest on women and workers of color, who make up a larger share of workers in lower-paid occupations,” the Treasury Department found. These less-advantaged workers “often have diminished bargaining power because they lack the resources to easily switch jobs or occupations, to reject or negotiate against signing restrictive employment agreements, or to seek legal recourse for violations of labor and employment law.”
Union Power Is the Answer
The Treasury report also connected diminished worker power to declining unionization. Union density rates plunged from 20.1% of the workforce in 1983 to just 10.3% today, which “further weakens workers’ bargaining power, leaving them with less ability to counterbalance firms’ wage setting power.”
Less countervailing power against ever stronger corporations means fewer improvements in workers’ wages, benefits, pensions and working conditions. Creating this countervailing power was the economic logic behind the post-WWII era of the government protecting workers’ rights to unionize and bargain. Unions would help allocate excess profits from shareholders and owners to workers, creating shared prosperity.
A Brookings Institution report identified this confluence of “Rising profitability and market valuations of US businesses, sluggish wage growth and a declining labor share of income,” in which profits go from workers to capital owners and workers get a smaller amount of national output.
Countering this trend, unions give workers the power to earn higher pay and better benefits, the Economic Policy Institute (EPI) explained. “Unionized workers earn more than their nonunion counterparts, have better benefits, and have the security of a written contract—a collective bargaining agreement—protecting their rights.”
By raising the bar, unions “actually raise wages for nonunion workers,” EPI noted, because a strong labor movement does the political and economic bargaining work that enacts “policies like a higher minimum wage, paid family leave, and voting rights.”
Many policies can help older workers and retirees—such as boosting the minimum wage, expanding Social Security and Medicare, and promoting better pensions—but the surest way to build worker power is with strong unions. Creating economic and retirement security for older Americans requires improving workers’ power—their ability to command stronger wages, benefits and pensions. Unions are the pathway to that power.
Christopher D. Cook is senior writer at The New School for Social Research (SCEPA) in New York. Teresa Ghilarducci, PhD, is the Irene and Bernard L. Schwartz Professor of Economics and Policy Analysis at SCEPA.