Testimony of Nari Rhee before the Health, Employment, Labor and Pensions Subcommittee of the U.S. House Committee on Education and Labor on how the US retirement system can be strengthened and made more inclusive, so that all workers – regardless of race, gender, or class – can have economic security in retirement.
Good morning Chairman DeSaulnier, Ranking member Allen, and members of the Subcommittee. I am Nari Rhee, director of the Retirement Security Program at the UC Berkeley Center for Labor Research and Education.
Thank you for this opportunity to appear before you to discuss how the US retirement system can be strengthened and made more inclusive, so that all workers – regardless of race, gender, or class – can have economic security in retirement.
The US retirement system relies heavily on employer-provided retirement benefits to provide a critical supplemental layer of retirement income to complement Social Security. While Social Security is a bedrock, the current average benefit of $1,500 a month is insufficient to cover basic needs for most retirees, given the cost of living, much less to maintain the pre-retirement standard of living for middle-income households. In addition, workers face an increasing retirement savings burden due to declining replacement rates from Social Security. The Center for Retirement Research at Boston College estimates that the percentage of monthly earnings replaced by Social Security will decline to 36% in 2035, from 43% in 1995 and 40% in 2015.
I’d like to make three main points today related to inequalities in the current retirement system, and how to mitigate them. First, the employer-sponsored retirement system leaves out many groups of workers and jobs, in a manner that disproportionately impacts women and people of color, particularly Blacks and Latinos. Second, these gaps in coverage combine with dynamics within and outside of the labor market to produce marked inequalities in retirement assets by race, gender, and income, leaving most households short. Third, while some states have forged their own path to try to close this coverage gap and ultimately increase workers’ retirement incomes, federal policy action is necessary so that all workers are covered by a plan that effectively prepares them for a financially secure retirement, and to ensure that their wages are also sufficient to support this.