President Trump in his State of the Union address highlighted the country’s falling unemployment and rising wages. This morning’s Bureau of Labor Statistics’ report of an unemployment rate of 3.0% for workers age 55 and older for the month of January, a decrease of 0.3 percentage points from December, does not contradict the President’s view. However, while the headline unemployment rate is at an historic low and hourly wages did nudge up, these national numbers hide drastic geographic differences in the labor market. We find that cities with dynamic labor markets for prime-age workers are not necessarily welcoming to older workers.
The trend for national wage growth for full-time prime-age and older workers, adjusted for inflation, though volatile year-to-year, is essentially flat in the years following recovery. But in some cities, older workers’ wages fell while prime-age workers’ wages skyrocketed. For example, in San Francisco, prime-age workers’ wages grew by 19%, whereas older workers’ wages fell by 15%.
In the five cities where the wage growth gap between older and prime-age workers was largest — San Francisco, Omaha, Charlotte, Salt Lake City, and Little Rock — older workers’ wages declined, while prime-age workers’ wages grew faster than average. One explanation might be that dynamic cities are fueled by tech, finance and healthcare — industries that often exclude older workers.
Encouraging people to work longer is hollow advice to those without adequate retirement savings, especially in areas where older workers’ wages are declining.
While President Trump ignored the systemic lack of retirement savings in his speech this week, we cannot abandon older workers to the whims of the labor market. The creation of GRAs (Guaranteed Retirement Accounts) is necessary to preserve older workers’ ability to retire when their skills are no longer in demand. GRAs provide retirement savings accounts to all workers as a supplement to an expanded Social Security program. With the GRA, even those unable to work at older ages will have an adequate income in retirement.
SCEPA’s Retirement Equity Lab (ReLab), led by economist and retirement expert Teresa Ghilarducci, researches the retirement crisis that exposes millions of American workers to downward mobility in retirement.