The Great Recession took any number of wrecking balls to the retirement security of American workers, including wages and pension benefits, home equity and savings. But one of the less understood areas of hurt continues to this day: part-time work.
The recession pushed the U.S. part-time labor force to 20.1 percent in January 2010 from just under 17 percent, and it remains high today at 18.3 percent of the workforce, according to Bureau of Labor Statistics data.
New research from the Pew Charitable Trusts shows who that trend is hurting most when it comes to saving for retirement: young people, Latinos and African-Americans.
These workers tend to be employed in “lower-hour” industries where part-time work is more prevalent, including retail trade, arts, entertainment, recreation, hospitality and food service. And they are far less likely to have a retirement plan – or other benefits, such as health insurance and paid time off.
The availability of a workplace plan is a key component of success in building savings for retirement. Often, enrollment is automatic when workers start new jobs, as are the pretax contributions that follow. “It’s all about providing access,” said John Scott, director of Pew’s retirement savings project. “For the most part, people take advantage of the opportunity to save if it’s easy.”
For young people, lack of access is especially troubling because getting an early start on retirement saving is the financial equivalent of low-hanging fruit. The magic of compounding means that early starters can do more with less, accumulating savings with lower contribution rates.
For minority workers, the access problem is a key driver of retirement security later in life – namely, the yawning racial divide in retirement savings that has been evident for years. Savings among nonwhite households near retirement (age 55-64) average $30,000 – four times less than white households, according to the National Institute on Retirement Security.
Learn more in my column for Reuters Money.