States face a range of short- and long-term challenges that are affecting the financial security of American workers.
In addition to stagnant wages and the rising cost of living, many workers lack access to important workplace benefits, including health care, paid leave and retirement savings. “An aging population and the rise of gig workers have added new challenges to states still struggling to recover from the pandemic,” says John Scott of The Pew Charitable Trusts. Scott, who directs Pew’s Retirement Savings Project, partnered with NCSL in August to host a preconference on financial security and the workforce at NCSL’s 2024 Legislative Summit in Louisville, Ky.
The half-day preconference provided a forum for policymakers to discuss retirement savings initiatives, portable benefits for gig workers, and paid leave and caregiving policies. Experts from AARP, the Aspen Institute, the American Retirement Association, the Shipt delivery service company, and legislators from both Washington and Utah provided a wealth of knowledge and expertise for attendees as they tackle these issues and explore the feasibility of legislative solutions in their states.
Worker Demographics Are Changing
The labor force participation of older Americans is rising, with 27% of adults 65 to 74 employed in 2022, up from 20% in 2002. These numbers are expected to continue climbing, likely reflecting changes in the skills required for jobs, skills of workers, improved health and longer life expectancies. Many workers are also postponing retirement or returning to work after retiring out of financial necessity and insufficient retirement savings.
Similarly, the number of nontraditional workers in the U.S. is growing, with around 30% of American workers engaged in gig or independent work. Most nontraditional workers cite the need to fill income gaps, a desire to save and flexible schedules as their primary reasons for taking on nontraditional jobs. Unfortunately, nearly half of recent or current gig workers say companies have been unfair when it comes to their employment benefits.
Adding to these challenges, the U.S. population is aging at an unprecedented rate. The growing population of elderly households is driving a rising demand for long-term care services; however, with the average annual cost of nursing home care ranging from $90,000 to $108,000, these services are inaccessible to many families. This often results in workers leaving the workforce to care for family members, which has a negative economic impact on individuals, families and the workforce.
With an aging population and a constantly evolving workforce, access to public and private workplace benefits such as paid leave, portable benefits and retirement savings is paramount to workers’ financial well-being.
Retirement Savings
Although the population is aging rapidly, many households are not saving enough for retirement. This issue is more acute in the private sector, where an estimated 56 million workers do not have access to a retirement plan through their employer. Nathan Glassey, director of state and federal affairs at the American Retirement Association, says the retirement savings crisis has the potential to cost state and federal governments $1.3 trillion by 2040. “This meeting gave us a chance to connect and help support others’ work to close the retirement plan coverage gap affecting so many Americans,” Glassey says.
State-mandated retirement plans, such as auto-IRAs, are one strategy some states have used to close the savings gap. Auto-IRA programs offer automatic enrollment for employees currently without access to an employer-sponsored retirement plan or pension. These programs automatically deduct a percentage of an employee’s earnings to put toward retirement.
To date, 20 states have implemented state-facilitated retirement programs for private sector workers. One such program, Washington Saves, was adopted earlier this year, adding an auto-IRA to the state’s existing retirement marketplace. Washington Rep. Kristine Reeves (D), one of the main sponsors of the bill establishing the program (SB 6069), shared with attendees the challenges and opportunities she encountered throughout the legislative process. In addition to auto-IRAs, some states have adopted or are considering retirement marketplaces or voluntary multiple employer plans to improve access to retirement savings.
Portable Benefits
Portable benefits are a new way of imagining employment benefits, such as health insurance, retirement benefits and paid leave. Instead of benefits being tied to an employer, they are tied to an individual. Kara Watkins of the Aspen Institute says expanding workplace benefits to gig and nontraditional workers supports their financial stability and helps foster a more resilient economy.
Alyssa Doom, the federal affairs director of the app-based delivery service Shipt, says the ideal portable benefits system allows workers to earn benefits based on their earnings, no matter the employer. Workers can put these funds toward the benefits of their choice, including retirement savings, health insurance, child care or even tuition reimbursement. Gig workers, who typically find work on multiple apps, can combine benefit funds accrued on one platform with benefits earned on others.
Utah Rep. Ryan Wilcox (R) says his state passed legislation (SB 233) in 2023 authorizing government or private entities to offer voluntary portable benefit plans. The hope is that the plans help individuals access benefits usually associated with traditional employment. Earlier this year, Shipt launched a pilot project in the state to gauge worker feedback.
Paid Leave for Caregiving
Paid leave, especially for caregivers, is becoming an increasingly important issue for legislatures and public employees. NCSL’s Glenn Jacoby says 13 states now have mandated paid family and medical leave programs, which tend to cover leave for a personal medical issue, a loved one’s medical issue and parental leave. Another handful of states are using an insurance model in which employees can opt to pay into a paid leave system.
Anna Doroghazi of AARP says its data shows that two-thirds of working caregivers struggle with work-life balance. On top of employee challenges, most small-business owners support state-facilitated paid family medical laws, which improve employee morale, increase employee retention and lower employer costs.
Exchanging Ideas: A First Step Toward Action
Throughout the preconference, attendees had the chance to share their experiences, ask questions and engage with their colleagues from across the country. “Being able to discuss ideas with other legislators is so important. I appreciate having the opportunity to hear about what is and is not working around the country,” Georgia Rep. Leesa Hagan (R) says.
As the American workforce continues to evolve, the exchange of ideas among policymakers provides opportunities for innovation and collaboration. Creative approaches to modern workforce challenges, such as the retirement savings gap, the rise of gig workers and paid leave for caregivers, are key to ensuring that all workers—regardless of income level or employment status—can afford life’s necessities while planning and saving for the future.
Angela Rowe is a policy specialist and Landon Jacquinot is policy associate in NCSL’s Employment, Labor and Retirement Program.