Seniors and the Financial Crisis
Our research shows how the recession and stock market collapse affect older adults and how the economic recovery package might help.
How Will the Stock Market Collapse Affect Retirement Income?
full report | related brief
Counting the Unemployed
Tracking Retirement Accounts
- How Is the Financial Crisis Affecting Retirement Savings?
(Fact Sheet, August 2009 Update) - How Is the Financial Crisis Affecting Retirement Savings?
(Fact Sheet, May 2009 Update) - What the 2008 Stock Market Crash Means for Retirement Security
(Discussion Paper, Apr. 23, 2009) - How Is the Financial Crisis Affecting Retirement Savings?
(Fact Sheet, Mar. 9, 2009 Update) - How Is the Financial Crisis Affecting Retirement Savings?
(Fact Sheet, Dec. 10, 2008) - How Is the Economic Turmoil Affecting Older Americans?
(Fact Sheet, Oct. 7, 2008)
Evaluating Stimulus Proposals
Richard W. Johnson
The sound workforce-development idea needs to be backed up by more funds for training and employment services or few jobless seniors will find work.
The proposed American Recovery and Reinvestment Act includes $120 million to train low-income older Americans and help them find jobs. This is a laudable goal that could stimulate the economy and bolster retirement security, but the proposal is underfunded so can't have much impact.
As the population ages, older workers are taking center stage and hold the key to our future prosperity. The pool of 25- to 54-year-olds—traditional mainstays of the workforce—will grow by only 2 percent through 2020. And workforce stagnation can choke off economic growth, reduce tax revenues, and strain the government's ability to finance essential services.
The good news is that older workers are beginning to step in and fill the gap. Over the past decade, the labor force participation rate at ages 55 to 69 jumped eight points to 56 percent. Workers ages 55 and older now account for one fifth of the labor force ages 25 and older, up from 14 percent 15 years ago. Only if these trends continue can the economy expand.
Even though they are no longer bit players, older workers are not used to their full potential. Back in 1950, when jobs were more physically demanding and health problems at older ages were more common, nearly 7 in 10 men ages 55 and older worked. Today, fewer than half do. Labor-force participation rates especially lag for older adults with little education and limited skills. Only one in six adults ages 55 and older who didn't finish high school have jobs. For college grads, it's more than two of every five.
The recession makes it even more difficult for older workers to find jobs. In December 2008, the unemployment rate for adults ages 65 and older reached 5.1 percent, the highest level for seniors since March 1977. In past recessions, many older workers retired when they lost their jobs. But few laid-off seniors can afford that route when stock market losses deplete retirement accounts. Helping older Americans find and keep jobs would bolster their current incomes and improve their future retirement security, increase consumer spending, and stimulate the economy.
The stimulus proposal aims to help low-skilled older Americans find work by adding $120 million to the Senior Community Service Employment program (SCSEP), the nation's only workforce development initiative targeted to older adults. This program helps workers ages 55 and older with incomes below 125 percent of the federal poverty level acquire job skills, provides training and other supportive services, and places participants in subsidized, part-time community services assignments.
SCSEP helps only a small share of the older adults who could use it, and that number won't increase much under the stimulus proposal. The program now serves only about 80,000 adults, and the requested recovery funds would cover 24,000 more participants. For perspective, 1.4 million adults ages 55 and older were unemployed in December 2008 and more were underemployed. And that's excluding the untold numbers who have given up looking for work. In sum, the sound workforce-development idea embodied in the stimulus proposal needs to be backed up by more funds for job training and employment services for older workers or few jobless seniors will find work.
Melissa M. Favreault
These modest one-time supplements would ease immediate pressures on these households. While the spotlight is on SSI, Congress should consider modernizing this neglected program.
Often called the forgotten safety net, the Supplemental Security Income (SSI) program provides cash payments to those ages 65 and older, the blind, and the disabled. Arguably, SSI has a much lower profile than Temporary Aid for Need Families (TANF), but reaches more people. In December 2007, 7.1 million Americans received federal SSI benefits, compared with 3.9 million for TANF.
The American Economic Recovery and Reinvestment Plan authorizes a one-time emergency payment to SSI beneficiaries (and to beneficiaries cut off in the prior two months because their incomes exceeded program limits). In the House version of the bill, the sum would average about $450 for individuals and $630 for couples. Payments, based on the average monthly SSI payment, would be made within 90 days of enactment and cost, the Congressional Budget Office estimates, about $4.1 billion in 2009. In the Senate bill, one-time payments to SSI beneficiaries are more modest, set at $300 and Social Security beneficiaries would also get one-time grants. Total program costs would increase to closer to $16.7 billion.
Boosting SSI payments would stimulate the economy. All SSI beneficiaries have low incomes and few assets. Close to half live in poverty and slightly more than half receive no other income so are likely to spend their payments quickly. These modest one-time supplements, amounting to about two-thirds of the base federal benefit (set at $674 per month for an individual and $1,011 for a couple in 2009), would ease immediate pressures on these households.
Payments to Social Security beneficiaries, in contrast, would be targeted less well. While many Social Security recipients are also economically vulnerable, many are not. Providing payments to higher-income beneficiaries is likely to be less effective than targeting families hurt more by the economic downturn.
While the spotlight is on SSI, Congress should consider modernizing this neglected program. The federal monthly benefit grows annually with inflation, but other features of SSI have not changed in decades. For example, the program's asset limits have remained at $2,000 for individuals and $3,000 for couples since 1989. (Eligibility criteria do permit a home, one car, personal effects, and modest burial funds/insurance.) Recipients would need almost twice that much today just to maintain the same purchasing power. Increasing these limits could efficiently reduce poverty among older women, an especially vulnerable group.
Likewise, SSI's income exclusions have not changed since 1981. Beneficiaries can receive full SSI benefits if they have earned or unearned income of up to $20 and (further) earnings of up to $65 per month. Earnings beyond those meager sums reduce benefits by fifty cents for every additional dollar earned, and other excess unearned income (for example, from Social Security, Veteran's benefits, Worker's Compensation, or an employer pension) reduces benefits on a dollar-for-dollar basis. These outdated asset and income limits deter SSI beneficiaries from working and saving.
Other needed SSI reforms to consider in the longer term include further reducing the program's work disincentives, simplifying rules covering living arrangements, and addressing the difficulties child beneficiaries--now numbering over a million--face transitioning to adulthood when benefits may stop abruptly. Also in dire need of fixing is a tortuous benefit-application process, which is especially long and complicated for those with disabilities. Additional recovery funds are targeted toward modernizing Social Security Administration computers and helping to eliminate Social Security and SSI processing backlogs. Along with modernization of asset limits and income disregards (the amounts of income permitted without jeopardizing program eligibility), this funding could help increase the program's low participation rate.
Sheila R. Zedlewski
SNAP benefit increases will provide an effective stimulus and help America's neediest. To make long-term dependence less likely, the package might also fund more workforce-development services.
The Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program), provides the only near-universal assistance to low-income households. Most benefits go to America’s neediest. About nine in ten SNAP recipients live in poverty; more than one in ten has no other source of income. Over eight in ten such households contain a child or an elderly or disabled person.
The recovery proposal would spend $20 billion on temporarily increasing SNAP benefits and drop the benefit time limit for able-bodied adults without dependents. The proposed SNAP benefit increase of 13.6 percent will provide an effective stimulus. By U.S. Department of Agriculture estimates, each additional food stamp dollar should generate $1.84 dollars in total economic activity. The increased benefits will also help low-income families pay for groceries. The average benefit today provides only $7 a day to feed an entire household. SNAP benefits are adjusted annually as the cost of the items in the Thrifty Food Plan change. Still, many recipients report running out of grocery money every month.
The benefit increase, along with recent state efforts to simplify the application process, could encourage more eligible families to apply for benefits. In 2006, only 67 percent of people eligible for SNAP received benefits. Thus, an extra $300 million in the proposal would help states administer increased caseloads.
Dropping the time limit on SNAP benefits for able-bodied workers, itself a stimulus, will help unemployed adults without children get by in this job-jettisoning recession. The current time limit aims to encourage work among this group by requiring at least 20 hours of work a week to stay eligible after the first three months.1
But expect trouble when the provisions expire at the end of fiscal year 2010. Since households still on the food stamp rolls will feel what amounts to a benefit cut then, lawmakers instead should consider a one-time permanent benefit increase. This move would recognize the near impossibility of feeding a household on $7 per day. As the economy recovers and fewer need this help, the impact on the federal budget will diminish.
To make long-term dependence on SNAP less likely, the recovery package might also include money for states to offer more adult beneficiaries workforce- development services. Today, SNAP’s small employment and training service component covers relatively few recipients. As more low-wage adults turn to SNAP for help, adding employment services to the benefit package makes good economic sense for them and policy-makers concerned about the program’s size over time.
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[1] States with unemployment rates in excess of 10 percent already can apply for waivers from the time limit.
