Featured Story: Government Bridging the Retirement Savings Gap
This week, Maryland became the latest state to adopt a state-run retirement program for workers who do not have access to a retirement program through their employer, with Gov. Larry Hogan signing the legislation into law on May 10. The new law mandates that employers with ten or more full-time employees offer a retirement savings program option to their workers, with the state-run program—The Maryland Small Business Retirement Savings Program—being one of these options. Through the state-run program, individual employees are automatically enrolled to contribute 3 percent of their wages, though they can elect to opt-out.
As Melanie Waddell writes in ThinkAdvisor, more and more states are choosing to set up their own retirement programs, since millions of employees work for employers that either don’t offer plans or only offer plans to some employees, or are self-employed. California was the first to begin considering the idea, introducing a bill to explore the possibility of the California Secure Choice Retirement Savings Program in 2012. Connecticut and Oregon have both recently passed legislation to offer state-run retirement plans; Waddell writes that 20 states are currently working on developing state-run programs.
At the federal level, last week 65 House Democrats sent a letter to President Obama urging him to require all federal contractors to automatically enroll their employees in retirement savings plans, Rachael Bade of Politico reports. If companies don’t offer pensions or 401(k)s, the letter suggests that they enroll their employees in myRA, the government-run retirement savings plan launched last year. This effort was led by Joe Crowley (D-NY), who described its importance in a statement: “With nearly half of all workers not having access to a retirement plan through their employer, and many more either not eligible for their employer’s plan or not aware of their employer-provided options, fewer than 10 percent of those workers are contributing to a savings account on their own.”
Andrea Peterson and Jonnelle Marte of The Washington Post report that Google has banned all payday loan ads from its site. Google’s announcement was made as abusive payday lending practices have come under increased scrutiny, with the CFPB finalizing new rules to regulate the industry. “Critics of payday lenders say they hope the move by Google and other tech companies might undercut the business which finds huge numbers of willing customers on the internet,” Paterson and Marte wrote. The announcement also shows the willingness of a large tech companies to take a decisive stance on policy issues that are not directly related to their bottom lines. In addition to Google, Facebook has also banned payday loan ads. Nevertheless, consumers can still access payday lenders through Google searches.
The Washington Post’s Emily Badger writes on the interplay between school districts and income segregation, the concentration of people of similar economic circumstances in an area. Covering new research published in the American Sociological Review, Badger pointed out that wealthier parents are increasingly buying homes in top school districts, which are also generally in wealthier neighborhoods. Consequently, rich and non-rich families are less likely to share the same neighborhood or the benefits that such a neighborhood affords than they were in the past. The magnitude of the effect of this trend is significant: “The recent rise of income segregation... is almost entirely caused by what's happening among families with children,” as childless families are more likely to live in economically diverse areas. “[It] is in effect the aggregate outcome of parents who can afford to jockey for position [in a school district] for their kids,” Badger writes.
Manufacturing in a Changing Economy
In The Washington Post, Jim Tankersley describes on how blue-collar jobs may no longer be a payway to the middle-class in the United States. In addition to the shrinking number of positions in the field, production job wages are also in decline. Since 1990, the hourly wages of those working in manufacturing have dropped 6 percent. As a result, people occupying jobs that used to provide a reasonable level of financial security now often receive incomes small enough to be eligible for public assistance. Eduardo Porter covers these shifts in the labor market in The New York Times, noting that “America has been here before.” At the turn of the 20th century, the U.S. economy transformed from one based largely on agriculture to that of industrial production. According to Porter, the transition was painful but also pivotally different as government played a more significant role in easing the suffering caused by the shift through a range of progressive policies. He argued that large-scale investments in infrastructure could help alleviate some of the pain caused by the current transition.
“We need systems that work to address short-term needs and support long-term success,” writes Sade Bruce in the New America Weekly. Sharing her experiences working at LIFT, a DC-based nonprofit, she writes on how complex eligibility rules regularly prevent households from accessing the public benefits and services that they needed to achieve economic stability. She shares the personal stories of two people whom she was unable to help and how those experiences spurred her desire to work to improve the public assistance system through policy. “The policies I work on now are personal to me because they seek to improve the economic stability of American households filled with people I have met,” Bruce writes.
News in Brief
- Ashley Blackwell in Talk Poverty considers how “gentrification weakens displaced families’ access to social services that are critical to achieving social mobility.”
- Uber struck a deal with a union that will enable drivers to receive more benefits, such as paid time off and parental leave, Noam Scheiber and Mike Isaac report in The New York Times. However, the union will not be able to do any collective bargaining on behalf of the drivers.
- Alan Pyke of Think Progress reports that at least three major banks are planning to offer small-dollar loans at much lower costs than that of payday loans once the CFPB’s rules of payday lending are finalized.
- In Think Progress, Bryce Covert describes how the justice system is skewed against low-income people in civil court, as there are too few legal aid attorneys to meet the need of the population.
- Earlier this week, Google announced they were banning advertisements for payday loans. The Atlantic’s Gillian White reports on the implications for users of these alternative financial services.
National Savings Forum | America Saves | May 18, 2016