Gone are the days when workers with only a high-school diploma could find a good-paying job, buy a home, and raise a family in a financially stable environment. The past decades have seen the U.S. manufacturing base shrink and the service sector grow, leaving millions of workers with their backs against the wall.
Many well-paying blue-collar jobs—and an expanding number of white-collar jobs—are being outsourced overseas. Workers are agreeing to significant pay cuts to keep their jobs and benefits. Compounding that problem is the reality that technology and a global economy have rendered many assembly-line manufacturing jobs obsolete, while postindustrial professional and managerial jobs will be in greater demand.
By 2018, almost two-thirds of the jobs available to Americans will require some postsecondary education—a certificate, two-year degree, bachelor’s degree or higher, according to a June 2010 report from Georgetown University’s Center on Education and the Workforce. That’s a drastic change from 1973 when 40% of the U.S. work force were high-school graduates and 32% were high-school dropouts. At that time, only 16% of workers had a bachelor’s degree or better. The trend isn’t theory; it’s reality.
Georgetown cites the iPod as an example of a postindustrial product. “Less than 20% of the value added in the manufacture of video and audio equipment from the U.S. comes from the blue-collar workers who manufacture it,” according to the Georgetown report. “By contrast, 80% of the value added comes from white-collar workers who design, market, finance, and manage the global production and dissemination of these products.”
But Georgetown also notes that nine of 10 workers with a high-school education or less already are clustered in occupations that either pay low wages or are in decline. During the next five years, 60 million Americans are at risk of being locked out of the middle class, “toiling in predominantly low-wage jobs that require high-school diplomas or less,” according to the Georgetown report.
One possible outcome within the next few years, predicts Georgetown, is three million or more U.S. jobs will go unfilled because workers lack education and training. The most immediate challenge is educating and assisting workers in their 30s, 40s, and 50s. An even greater challenge is increasing the financial knowledge and education of generation Y and the generations to follow. There’s no short-term fix. “This is a marathon, not a sprint,” according to the Credit Union National Association’s (CUNA) Financial Literacy Task Force report.
Pending retirement crisis
Preparing consumers for retirement is the most immediate problem given the millions of baby boomers who are fast approaching retirement age but are well behind their retirement goals. The average 401(k) balance in the U.S. is slightly less than $67,000, according to a June 2010 report from Boston College’s Center for Retirement Research. That figure is a bit misleading because it’s drawn down by the low savings of moderate- to low-income wage earners, the age cohort in which a worker resides, and years in the work force.
Wage earners with annual income of less than $60,000, for example, have a median 401(k) balance that’s less than $17,000, according to U.S. News & World Report. But wage earners in their 50s that fall into that income category have a median balance of almost $77,000. For more solidly upper-middle-class wage earners—those making more than $100,000 a year—the overall median 401(k) balance is just under $60,000. For people in their 50s who earn more than $100,000 annually, the average balance is almost $370,000. That’s still not enough.
Even the most optimistic numbers demonstrate that most American workers are not saving enough. About 18% of Americans with 401(k)s drew down their balances during the recent recession, according to AARP. And the dismal 401(k) picture isn’t complete without factoring in the decline of traditional defined-benefit pensions.
Along with Social Security, traditional company or government pensions have enabled many retired employees to enjoy a secure retirement. Boston College reports that 62% of workers had company-funded pensions in 1983 and only 12% had
401(k)s. By 2007 those figures had flip-flopped—17% had company-funded pensions and 63% had 401(k)s. And 401(k) balances are significantly affected by stock market fluctuations, which makes retirement planning trickier as employees age.
Most Americans at or near retirement are “consumed by fear,” says Anthony Webb, a research director at Boston College in a Miami Herald interview. “Instead of walking on the beach hand-in-hand in retirement, the reality is that they’re sitting around the kitchen table cutting coupons.”