Urban Wire Low pension participation among minorities contributes to the wealth gap
Karen E. Smith
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Families of color have lower average retirement savings than whites. While many factors contribute to the racial savings gap, differences in access to employer-provided pensions play a role. Compared with whites, workers of color are less likely to work in jobs that offer a pension and they are less likely to participate in those plans when offered.

These differences have increased over time. The cumulative effect of lower lifetime access to employer-provided pensions partly explains the lower retirement savings among minority workers compared with whites.

Many workers don’t have access to a pension plan

As the shown in the chart below, access to employer-provided pensions has remained below 60 percent on average over the last few decades.

While pension offer rates increased during the 1990s, they have generally fallen since. According to the Current Population Survey, 55 percent of white workers ages 20 to 69 worked for an employer that offered a pension plan in 1979. This share increased to nearly 63 percent in 2000, before falling to 57 percent by 2013.

Pension offer rates for black workers were similar to white workers before 1994, but black workers did not see the same gains in pension access in the late 1990s. Offer rates have fallen for blacks since 2000.

Hispanic workers have even less access to employer pensions than other groups. In 1979, only 44 percent of Hispanic workers had access to an employer pension, and that share fell to 37 percent in 2013.

Those with access to a retirement plan don’t always participate

The racial gap in employer-provided pension coverage is even bigger when we look at pension participation. The rising prevalence of 401(k) pension plans modestly increased access to employer-provided pensions, but there’s a catch—many employers require worker contributions to access employer contributions.

While participation rates among those offered a pension are relatively high, participation rates are lower for blacks and Hispanics than they are for whites. In 2013, about 83 percent of white workers offered a pension participated in the plan, but only 75 percent of black and Hispanic workers participated.

In 2013, 47 percent of white workers participated in an employer pension plan, compared with only 40 percent of black and 28 percent of Hispanic workers. In 1979, blacks were about 8 percent and Hispanics were 20 percent less likely to participate in an employer pension than whites. By 2013, the gap increased to 14 and 40 percent respectively.

Looking toward the future

Over the last decade, employers have increasingly adopted automatic enrollment and automatic escalation—policy options designed to increase worker participation and savings. Despite these policy changes, pension participation among American workers remains quite low for all workers, especially for workers of color.

However, both pension offer rates and pension participation rates increased in 2013 compared with 2012. As the economy recovers from the Great Recession, pension trends may again be on the upswing, but retirement savings accumulate over a career. With a long history of low pension access contributing to their lower retirement savings, workers of color have a long road ahead of them before they can catch up with their peers.


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Research Areas Wealth and financial well-being Race and equity
Tags Inequality and mobility
Policy Centers Income and Benefits Policy Center