BERKELEY – The financial future looks brighter for millions of low-to-middle income workers in California in danger of slipping into poverty upon retirement thanks to legislation championed by Senate President pro Tempore Kevin de León (D-Los Angeles), according to research released this week by the University of California Berkeley’s Center for Labor Research and Employment.
The research credited two laws for creating enhanced financial security for future retirees: California’s 2016 law to increase the minimum wage to $15 per hour by 2022; and Senator de León’s measure, also of 2016, to create the Secure Choice Retirement Saving Program for private-sector workers in jobs that don’t offer a pension or a retirement-savings plan.
On Capitol Hill, the Republican-controlled Congress has done nothing to address the crisis. Rather, it has tried to derail retirement savings programs in several states at the behest of Wall Street private investment firms who fear the competition.
“While Republicans in Washington D.C. have turned their backs on hard-working Americans, the California Legislature has taken steps to provide retirement security and a livable wage for those more likely to suffer from poverty after they’ve become too old to work,” said the Senate Leader.
Senator de León pushed the minimum wage bill through the Senate where it passed by a 26-12 vote. “At its core, this proposal is about fairness,” he said at the time. “This is historic, and today I am proud to be a Californian.”
There is a looming crisis facing the United States where 44 percent of all households between 25 and 64 years of age have no retirement savings. In California, there are about 7 million workers without access to a work-place retirement savings plan. Local, state and federal governments with already strained budgets will face a growing population of retirees in need of assistance to provide basic necessities like food and housing.
“Regardless of socioeconomic status, the hard-working people of California who have made our state a global economic powerhouse deserve a measure of financial security in their golden years,” said Senator de León. “These laws will benefit our current workers and younger generations who can look forward to a measure of dignity when they retire.”
Conducted by the center’s director Nari Rhee, the research found that the combined impact of Californian’s minimum wage law and the Secure Choice Retirement Savings Program can increase young, low- and middle-income workers retirement income by about 50 percent compared to baseline Social Security benefits.
A $15 an hour minimum wage will result in higher lifetime earnings of about 20 percent for a typical young, low-wage worker and, in turn, increase Social Security benefits by $1,720 annually, the research found. For a middle-career worker the increase would be $590 per year.
Regarding the Secure Choice Retirement Savings Program, the research found that a typical 25-year-old worker making a steady 5 percent paycheck contribution to the Secure Choice retirement account can expect to reap $7,060 annually in today’s dollars. A 45-year-old worker could expect retirement income of $2,250 per year.
Employers who do not offer a retirement savings plan and employ more than five workers must facilitate enrollment into the opt-out program but will not have to contribute to it or be responsible for its investments. Secure Choice is scheduled for statewide enrollment in 2019 and will be implemented by the State Treasurer and administered by private financial firms.