Millions of Californians are falling into what a new study calls the "private pension gap." These are 6.3 million Californians, mostly lower and middle-income workers, who have no access to a retirement plan at work, according to the study released by the University of California, Berkeley, Labor Center.
"Based on data from the three-year period 2008-2010, only 45 percent of private sector workers age 25–64 in California work for an employer who sponsored a retirement plan – even less than the U.S. average of 53 percent," says the study, authored by Nari Rhee, a researcher at the Center.
The study also finds that:
- Only 37 percent of employed private sector workers in California actually participate in an employer-sponsored retirement plan
- There has been a downward trend in workplace retirement plan coverage in California since 1998-2000, when 50 percent of private sector workers had access
- Access is worst among low-wage workers (22 percent in the bottom quartile); employees of small firms with less than 100 employees (25 percent); and Hispanics (32 percent)
- Seventy-five percent of these workers make less than about $46,000 a year.
The typical California private sector worker, who lacks access to a workplace retirement plan, will receive Social Security benefits equal to just 50-60 percent of the amount needed to pay for basic expenses like food, housing, and health care, says the report, which expands on a report Ms. Rhee did in October 2011 that found nearly half of California workers are on track to retire in or near poverty.
"For most people, retirement security is not about living in luxury, nor is it about just surviving; it is about having adequate resources to enjoy their families and interests after a lifetime of hard work while they are still in good enough health to do so," says Ms.Rhee.
State Sen. Kevin de Leòn, D-Los Angeles, says the new study reinforces his arguments in favor his proposal setting up a state retirement plan for low- and moderate-income residents.
"SB 1234 addresses this population by providing them a portable and reliable retirement plan that will serve as a modest supplement to Social Security," says Mr. De Leòn. "If we don't offer this, most of these people will retire into poverty putting a further strain on our already scarce public resources."