The new low-wage reality for older Americans

Thanks to economic instability and an eroding pension system, Americans are working longer than ever. But it turns out there’s a twist in how they’re working: New research shows workers older than 55 increasingly hold low-wage jobs.

The findings may add to the anxiety that haunts many workers about how -- or if -- they’ll have the financial resources to retire. In September, slightly more than 27 percent of full-time workers over 55 years old held low-wage jobs, compared with 19 percent of younger workers, according to Teresa Ghilarducci, professor of economics at The New School for Social Research.

Low-wage jobs, defined as those that pay less than two-thirds of the median wage, deliver about $539 per week in income, or annual earnings of about $28,000. The trend may build as baby boomers continue to hit their golden years without the resources to manage a comfortable retirement, Ghilarducci said. 

In some cases, older workers are forced out of the middle-income jobs they’ve held. Then, unable to find work in their prior careers, they accept lower-paying work such as in retail, home health care or housecleaning.

“Experience doesn’t have the rate of return as it used to have,” Ghilarducci said. “Older workers are being squeezed out of their career jobs. Men are going into low-wage, nonunion jobs, and women are going into care work. It’s not really voluntary. It’s really about being forced to work because your pension income isn’t enough.”

Ghilarducci’s research provides color to a decade-long trend of older Americans continuing to work past the unofficial retirement age of 65. More than 9 million people over that age are working today, up from about 5 million a decade ago. That means about 20 percent of Americans over 65 are still in the workforce.

“As we have waves and waves of boomers hitting 65, they’re coming into retirement with less and less security, especially with the middle class,” Ghilarducci said. “The top third seem to have enough assets to not force them into the labor market. The middle class is really seeing their fortunes change a lot.”

Baby boomers by and large aren’t ready for retirement. Investment firm BlackRock finds that the generation faces a potential annual retirement gap of $36,371. Boomers closest to the retirement age -- those between 55 to 65 years old -- have an average of only $136,200 socked away for their golden years, which would provide slightly more than $9,000 of income per year. Though it doesn’t include Social Security benefits, that’s far below the typical boomer’s goal of $45,000 in annual retirement income.

While some policymakers may frame the decision to work longer as a positive development, Ghilarducci pointed out that it’s often the least healthy older workers who are pushed back into the labor market. “To think that people working longer is the price of progress, it’s a way to make ourselves feel better about it,” she said. “It’s the healthier ones that go into old age with choice.”

Some lawmakers have argued that Americans’ rising life expectancy and the projected strain on Social Security’s reserves require workers to spend more years in the workforce. But even though Americans are living longer, many don’t reach 65 in good health. A top cause of taking retirement sooner than planned is poor health, and low-income Americans are more likely to suffer from illness or disability than the wealthy.

Then there’s the gender issue. Ghilarducci finds women make up the majority of employees in seven of the top-10 low-wage jobs for older workers. In four of those jobs, women make up more than three-quarters of all workers, even though they’re a minority of older workers overall.

Older women may be more likely to get pushed into lower-paying jobs because of a financial double-whammy: They have lower lifelong earnings than their male counterparts, and they’re more likely to take time off from work to care for elderly relatives or children.

Ghilarducci said her recommendation for women is to take care of themselves first. “Tell your adult children that you love them, but they’re on their own,” she said. “Get good advice from fee-only advisers. Stay in the labor force as long as you can, and keep yourself healthy.”

Last, delay collecting Social Security benefits for as long as possible. Waiting until age 70 to do so boosts one’s benefits by about one-third compared with claiming at 62.

“We’ll see older women taking care of even older women if we don’t do something about pension security,” she said. “We’ll see older baristas and older people wiping our tables.”

As far as the future of Social Security, Ghilarducci said she believes the probability that the system will be shored up has never been greater in the last three decades. During the presidential debates, Democratic candidate Hillary Clinton said “we should raise the payroll tax and raise the earnings cap,” Ghilarducci noted. “That was the first time a candidate has said she would put more money into the system.”

Said Ghilarducci, “I’m much more optimistic about an expanded Social Security system.”