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Are Disappearing Employer Pensions Contributing to Rising Wealth Inequality?
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Are Disappearing Employer Pensions Contributing to Rising Wealth Inequality?

John Sabelhaus and Alice Henriques Volz
Federal Reserve Board, 2019
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Editorial Rating

9

Qualities

  • Analytical
  • Overview
  • Hot Topic

Recommendation

According to the US Congressional Budget Office, the richest 10% of Americans control about three-quarters of national wealth, while the bottom half owns just 1%. Economists John Sabelhaus and Alice Henriques Volz explore one possible factor in this gap: the state of US pensions and retirement assets. As employers have turned from defined benefit plans to defined contribution plans, workers must rely more on their savings to fund retirement. Anyone interested in the issue of economic disparity will discover fascinating details in this illuminating report.

Take-Aways

  • From 1989 to 2016, employers converted their retirement plans from defined benefit (DB) plans to defined contribution (DC) vehicles.
  • The wealthiest 25% of workers experienced an increase in their overall “retirement plan coverage” over the period, while the remaining 75% witnessed a contraction in their coverage levels.
  • The top quartile of wealth holders control a vastly disproportionate share of retirement assets – some 85% of DB assets and 83% of DC assets. 

About the Authors

John Sabelhaus and Alice Henriques Volz are economists at the Board of Governors of the Federal Reserve System.

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