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Comparative Perspectives of Health and Welfare Policy

Paper Session

Friday, Jan. 3, 2025 2:30 PM - 4:30 PM (PST)

The Marker Union Square San Francisco, Archer
Hosted By: Association for Social Economics
  • Chair: Nari Rhee, University of California-Berkeley

Comparative Anti-Poverty Impacts of Defined-Benefit Pensions and 401(k)/IRA Accounts

Nari Rhee
,
University of California-Berkeley
Enrique Lopezlira
,
University of California-Berkeley

Abstract

This paper examines the impact of defined-benefit (DB) pensions and assets held in defined-contribution (DC) plans—such as 401(k)s—and Individual Retirement Accounts (IRA) on senior poverty by race, gender, and educational attainment in the US. DC/IRA assets now dwarf assets held in DB pension funds (CRS 2023). However, the two schemes have different implications for retirement income and senior poverty due to two factors. First, DC/IRA assets are distributed more unequally among households than DB pension wealth (Sabelhaus and Volz, 2019; Jacobs et. al., 2021; Thompson and Volz, 2021). Second, while traditional DB pensions are paid out as steady lifetime monthly income, the translation of lump-sum DC/IRA assets into retirement income remains a challenge for retirees, plan sponsors, and regulators. Some households draw down their assets more slowly than necessary, while households that rely primarily on DC/IRA assets may draw down their assets too quickly (Ciciliano & Wettstein 2021), boosting their income in the short-term at the price of running short in the future. Based on data from the Survey on Income and Program Participation, we compare the anti-poverty impact of DB pension income and that of DC/IRA withdrawals, comparing current poverty rates by race, gender, and education with poverty rates based on household income net of these income sources. We then explore whether senior poverty rates would increase or decrease in the short term if retirees with DC/IRA assets used systematic decumulation strategies or annuitized their account balances.

Secular Stagnation and the COVID-19 Crisis: Lessons from South Korea and Taiwan

Kuochih Huang
,
National Chung Cheng University
Yeohyub Yoon
,
University of Denver

Abstract

Korea and Taiwan are two countries that coped well with the COVID-19 pandemic and benefited from export expansion during this period. However, they are not free from the secular stagnation tendency, primarily resulting from the depressing effect of rising private saving rates on aggregate demand. The COVID-19 pandemic has further exacerbated pre-existing economic problems. This paper investigates the impacts of the COVID-19 crisis by focusing on the unequal distribution of output and employment shocks across businesses, workers, and households. Although exports and investments increased during the pandemic, the two countries still suffer from high saving rates and unequal income and wealth distributions, which have collectively contributed to the deterioration of domestic aggregate demand. We further highlight the differences in the causes of weak domestic demand between the two countries. In Korea, there has been a surge in corporate liquidity preference, a decreasing share of employment in both the manufacturing and financial sectors relative to their output shares, and gender/employment type-based inequalities. On the other hand, Taiwan continues to be troubled by wage stagnation and rising income/wealth inequality, despite the dramatic growth of manufacturing outputs and employment since 2018. However, there was no significant gender gap in the employment shocks.

Retirement Savings by Race and Ethnicity: Access, Savings and Risk Exposure

Christian Weller
,
University of Massachusetts-Boston
Dania Francis
,
University of Massachusetts-Boston

Abstract

Retirement savings are highly unequally distributed by race and ethnicity. Black, Latino households as well as households of other or multiple races/ethnicities regularly have a lot fewer savings, either in retirement accounts or in defined benefit pensions, for their retirement than is the case for white households. Asian households, in comparison, have similar retirement savings amounts as white households. This paper summarizes data from the 2022 Survey of Consumer Finances and the 2022 and 2021 Survey of Income and Program Participation on retirement savings and relevant correlates by race and ethnicity. The data show that access to employment-based retirement benefits varies widely. Participation in such benefits also varies, although much less than access to retirement benefits. Participation thus can exacerbate racial differences in savings access. At the same time, differences in contributions to retirement plans are small, while the returns on those contributions can vary by race and ethnicity, further worsening racial retirement savings differences. Finally, exposure to a wide range of risks and the associated liquidity needs – in the form of loans and withdrawals – pose another key obstacle in saving for retirement for all racial and ethnic population groups. All non-white or Hispanic groups thus face systematic barriers to saving for their future, compared to white households.
JEL Classifications
  • I1 - Health
  • O0 - General