Numerous studies have shown that the Great Recession of 2008 profoundly impacted the labor status and retirement saving decisions of the American workforce. The following research summaries highlight the effect of the Great Recession on older worker unemployment and employee contributions to defined contribution plans.
Older Workers, Retirement, and the Great Recession
The Russell Sage Foundation and The Stanford Center on Poverty and Inequality
Richard W. Johnson, The Urban Institute
This paper examines the effect of the Great Recession on the labor force status of older men and women. The authors find that the severity of the Great Recession caused older workers to lose some of the protection against economic downturns that they have experienced historically. During the Great Recession, older workers were less likely than younger workers to lose their jobs. But the unemployment rate for older workers still increased considerably during the Great Recession. The rise in unemployment was particularly striking for workers age 62+, whose unemployment rate grew more rapidly than at any time in the previous 35 years. Unemployed older workers also experienced a much longer duration of unemployment than their younger counterparts. Unemployed workers 62+ were only half as likely as unemployed workers age 25-34 to find a new job within a year, and unemployed workers age 50-61 were a sixth less likely to do so.
401(K) Participant Behavior in a Volatile Economy
Working Paper, Center for Retirement Research at Boston College
Barbara A. Butricia and Karen E. Smith
This paper uses actual tax records from the late 1990s through the late 2000s to examine how economic downturns have influenced retirement saving behavior. The authors find that economic downturns significantly affected the participation rates, contribution amounts, contribution rates, and investment allocations of 401(k) participants – and that the Great Recession affected these choices more dramatically than any previous recession. During the Great Recession, participation in 401(k) plans declined across the board, particularly among younger workers. Median contribution amounts also decreased, with the sharpest decline for workers age 50-64. Similarly, median contribution rates declined, with the largest decline for workers age 60-64. (By 2010, contribution rates for this group had rebounded slightly, though they were still lower than pre-recession levels.) Finally, the percentage of 401(k) participants investing in bonds increased significantly.
The Relationship Between Job Characteristics and Retirement Savings in Defined Contribution Plans During the 2007-2009 Recession
Bureau of Labor Statistics, Monthly Labor Review
Christopher R. Tamborini, Patrick Purcell, and Howard M. Iams
This paper uses the 2008 panel of the Survey of Income and Program Participation matched to W-2 tax records received by the Social Security Administration to examine which job characteristics were linked to declining participation in defined contribution (DC) plans during the Great Recession. The authors find that labor earnings, employer size, industry-specific employment losses, and occupation were associated with changes in DC plan contributions. Employees were more likely to reduce their DC contributions if they experienced a decline in real earnings, worked for a small employer, worked in an industry with high employment losses from the Great Recession (such as construction or manufacturing), or were members of a union. In contrast, management and professional workers were less likely to decrease their DC plan contributions. The authors speculate that these variations could be due to differing perceptions of job security (employees at small companies, for example, may have perceived less job security than employees at large companies) or changes in employer matching contributions.