What's Behind the Pension Gap?

There's a yawning gap in the pension participation of older workers by income. The Center for Retirement Research of Boston College analyzes 1992 to 2010 data from the Health and Retirement Study to determine why this gap exists and what can be done about it.

Among people aged 50 to 58 in 2010, only 19 percent of those with household incomes below 300 percent of the poverty level participated in a pension at their workplace. Among workers in the same age group with incomes above 300 percent of the poverty line, the 56 percent majority participated in a pension at work. What accounts for this gap? The results of the analysis show that the low participation rate of low-income workers is not due to a lack of interest nor due to a lack of income. Instead, the gap is caused primarily by the lower employment rate of low-income individuals (they can't get a job) and the lower probability that those with a job will be offered a pension by their employer (they can't get a good job).

"Policies such as automatic enrollment that focus on pension eligibility or take-up are unlikely to close the pension coverage gap," conclude the CRR researchers. There's no quick fix for closing the gap, they say, because it will require not only more jobs, but more "good jobs."

Source: Center for Retirement Research at Boston College, Lower-Income Individuals without Pensions: Who Misses Out and Why?