August 7, 2018 is Black Women’s Equal Pay Day. This is the day in the year when black women finally catch up and earn as much as white men earned in the previous year. Since black women only earn 63 cents on the dollar that a white man earns, it takes them an additional seven months to earn the same amount as white men earn during a single year. This pay disparity also impacts black women’s retirement security. Despite these challenges, pensions help many black women achieve a secure retirement.
The pay gap for black women has a real impact on their retirement security. Since they earn less, they have less to put aside in savings. This is particularly problematic for workers in 401(k) plans. These plans disproportionately favor the wealthy, who have the disposable income to contribute significant amounts to their 401(k) plans. According to the Economic Policy Institute (EPI), the top fifth of families earned 63 percent of income, but had 74 percent of retirement savings in 2013.
In the same report, EPI found that only 41 percent of black families had any retirement account savings in 2013. Even among families with retirement savings, black families only had an average of $22,000 in savings. Social Security benefits constitute over a third of retirement income for white, black, and Hispanic seniors alike, but the share is greater for blacks and Hispanics (both 41 percent) than whites (34 percent). More than one-fifth (21 percent) of black seniors’ income comes from public and private pensions, compared with 17 percent for whites and 12 percent for Hispanics.
This is an important point. The percentage of black seniors with public pension benefits is 12 percent, just slightly less than the percentage of white seniors at 13 percent. Furthermore, according to EPI, black seniors actually receive slightly more in public pension benefits, $17,664, than white seniors, $16,800. The National Institute on Retirement Security reached a similar conclusion, finding that, in 2010, 24.1 percent of white working-age households had access to a pension plan, compared to 21.8 percent of black working-age households. Public pensions have long provided a source of secure retirement savings to black families that may otherwise face obstacles to saving for retirement.
Women of all races benefit from public pensions. Women are 80 percent more likely than men to be in poverty at age 65 or older. This is because they earn 25 percent less in retirement income than men. One reason is lower wages earned by women during their working years contribute to lower retirement savings. Another factor is that women are more likely to take time out of the labor force to raise children or provide caretaking duties to a family member. For women in jobs like health care or education, where defined benefit pensions are more common, these women earn higher incomes in retirement and, therefore, have lower rates of poverty due to their pension plan participation.
Protecting public pensions is important for all active and retired public employees who depend on their pensions for security in retirement. For women, though, and especially black women, public pensions are a critical source of retirement savings. It is vital that we protect these plans as we work towards a society with more equitable pay for all.