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Most Americans save for retirement through a workplace retirement plan, such as a 401(k) or 403(b).1 Still, more than one-third of full-time American workers lack access to this kind of plan, and access varies widely depending on a worker’s industry. Access to and participation in a retirement plan often depend on whether an employee is part time or full time, with part-time workers consistently less likely to have the option—or to choose—to join an employer-based program.2 Further, employers in certain industries are more inclined to offer retirement benefits to their employees than are those in other industries. A Bureau of Labor Statistics study shows that workers in “lower hour industries”—where part-time work is more prevalent, such as retail trade; arts, entertainment, and recreation; and hospitality and food service—are less likely to receive health insurance, paid time off, and, notably, access to employer-sponsored retirement plans.3 As for other retirement outcomes—including plan participation, barriers to participation, and plan balances—the data are still incomplete.
This chartbook examines access to and participation in defined benefit, or traditional pension plans, and defined contribution plans, such as 401(k), based on a combination of work status and industry type, specifically focusing on the distinctions between industries that predominately employ full-time versus part-time workers. The analysis uses data from the U.S. Census Bureau’s Survey of Income and Program Participation (SIPP). “Workers” refers to 18-to-64-year-old private-sector full- and part-time employees who were not self-employed, agricultural workers, or in the armed forces at the time of the survey. The chartbook builds on The Pew Charitable Trusts’ previous analysis of SIPP data by looking more closely at industry type.4 The key findings are:
The following charts delve more deeply into these findings. As policymakers address retirement security, this chartbook outlines clear differences among the retirement preparedness of employees working in different types of industries, which can inform policy decisions, and raises additional questions for future research.
Workers in lower hour industries average lower rates of access to employer-sponsored retirement plans than do those in higher hour industries. This discrepancy may be caused by the greater proportion of part-time workers in lower hour industries.5 However, full-time workers in lower hour industries also have significantly lower access rates than their counterparts in higher hour industries (39 and 29 percent, respectively). In contrast, part-time workers in higher and lower hour industries have nearly identical rates of access.6
Similar to rates of access, takeup of available employer-sponsored plans varies by industry type. For both full- and part-time workers, lower hour industry workers take up employer-sponsored retirement plans less often. Just over 40 percent of part-time higher hour industry workers take up plans, almost twice the rate of lower hour industry part-time workers. Differences in takeup exist for full-time workers as well. Nearly 80 percent of higher hour industry full-time workers take up plans, compared with 61 percent of lower hour industry workers employed full time.
There are several reasons why employees might not participate in a plan: They may be ineligible under employer policies, lack disposable income, or are saving in ways that make joining an employer-sponsored plan unnecessary. Among all workers, 53 percent of those in lower hour industries cite eligibility as their reason for not participating, compared with 45 percent of higher hour industry workers.7 A significant majority of part-timers in both industry groups say eligibility keeps them from participating, while a slightly larger majority of full-time workers cited affordability. Twenty-seven percent of part-time employees in lower hour industries cited affordability as a reason for not participating versus 18 percent for workers in higher hour industries—perhaps because of better wages in higher hour industries. Although a small proportion of workers cited lack of need as their reason for not participating in a plan, higher hour industry workers were twice as likely to offer this as an explanation.8
As household income increases, workers are more likely to take up employer-based retirement plans when offered. But lower hour industry workers at all income levels take up retirement plans at rates significantly below those of their higher hour industry counterparts. The proportion of workers taking up an employer-sponsored retirement plan climbs from 40 percent of all workers with household incomes of less than $25,000 to 80 percent for those making $100,000 or more. However, even at the highest income levels, higher hour industry workers are 40 percent more likely to participate than lower hour industry workers.
As a result of the lack of access and barriers to taking part in a plan, less than 30 percent of lower hour industry workers participate in any plan, while half of all workers in higher hour industries participate in either a defined contribution or defined benefit retirement plan through their employer. Among full-time workers, 55 percent participate in higher hour industries compared with 38 percent in lower hour industries. Part-time workers in both industry types have low rates of participation, perhaps due to issues of plan eligibility and less disposable income.9
Among all workers, those in higher hour industries have a median account balance that exceeds that of lower hour industry workforce by more than $5,000. While this difference persists among full-time workers, the data show no difference between part-time workers in higher and lower hour industries. The data also show that full-time workers in lower hour industries have the same median retirement account balance as part-time workers. This might be because lower hour industry workers are less likely to have access to a plan, have lower wages, and participate less than their counterparts in higher hour industries.
Focusing on industry type is especially important given that groups disadvantaged in trying to achieve retirement security are more concentrated in lower hour industries.10 For example, 39 percent of millennials are employed in lower hour industries compared with only 20 percent of older workers.11 White workers are least likely to be employed in lower hour industries, while Hispanics are the most often employed group (23 and 28 percent, respectively). Generational, racial, and ethnic differences in access to employer-sponsored retirement plans may align in part with the industries in which these groups work.
Employer-sponsored retirement plans play an important role in the accumulation of household retirement savings. Still, many workers lack access to such plans or fail to participate when they are offered. This chartbook examines how industry type may shape the opportunity and ability for workers to save for retirement. Workers in industries with a high proportion of part-time employees have lower access and participation rates as well as lower savings.
Part-time workers often face eligibility rules and other barriers to retirement security. As such, their prevalence in lower hour industries may require additional consideration from policymakers. But differences between lower and higher hour industries are not driven solely by the prevalence of part-time workers in lower hour industries. Full-time workers in these same industries often have worse retirement savings outcomes too. Thus, lower hour industries may affect the retirement savings of all workers for several reasons, including the low wages paid in these industries and the fact that many employers in these industries cannot afford to sponsor a retirement plan.
As policymakers consider ways to increase retirement savings, this chartbook outlines the importance of focusing on the characteristics of both employers and workers in lower hour industries. For example, these workers include groups with lower rates of access to employer-sponsored retirement plans, such as millennials and Hispanics. However, even among employees with access to a plan, the participation rate and the median plan balance are smaller for workers in lower hour industries. Further research that examines why workers in these industries do not participate at rates comparable to those in higher hour industries would provide policymakers with valuable information. For example, additional data might demonstrate that part-time and younger workers face steeper economic challenges in saving for retirement. A one-size-fits-all retirement policy that would merely provide private sector workers without an employer-sponsored plan the opportunity to save would not reduce these financial security hurdles. Similarly, creating a marketplace exchange for small businesses to shop for retirement benefit products may not address the particular competitive challenges facing employers in lower hour industries. This chartbook also points to the significance of the eligibility barriers that keep many workers from participating in their employer’s retirement plans.
This chartbook uses the most recent available retirement-related data from the U.S. Census Bureau’s Survey of Income and Program Participation (SIPP), a multiple cross-sectional and longitudinal study of various economic topics. Specifically, it relies on data from Wave 11 topical module focused on retirement savings plans conducted in 2012, using participants from the 2008 panel. The sample includes 18-to-64-year-old private sector full-time and part-time employees who were not self-employed, agricultural workers, or in the armed forces at the time of the survey (n = 23,166).12 Pew identifies two main types of employer-sponsored retirement plans: defined benefit plans (in which the employer primarily contributes to the fund) and defined contribution plans (in which the employee primarily contributes to the fund). Because respondents did not explicitly state whether their employer offered either of these categories, we construct these categories based on various characteristics.13
Data were weighted using person-level weights developed by SIPP. Tests of significance were used appropriate for variable type; for example, categorical data were analyzed using chi-square tests, and continuous variables were analyzed using analysis of variance (ANOVA) tests.