A] Prelude*
* For more general and detailed information about retirement, plans and systems, feel free to check our dedicated webpages:
https://expatpensionholland.nl/global-pillars-systems
https://expatpensionholland.nl/usa-expat-pensions
https://expatpensionholland.nl/europe-expat-pensions
Recent research conducted by Economist highlights a significant discrepancy between white and Black workers' retirement confidence. While half of white respondents feel confident about retiring by the federal retirement age, only 39% of Black survey takers share this sentiment.
Older Black workers (ages 51-64) face even greater uncertainty, as they're the least likely to participate in their employer-sponsored retirement plan. When they do participate, their portfolio balances are far smaller than similarly aged white workers.
According to the Government Accountability Office: "Of those with a retirement account balance, white households had significantly greater median balances than households of all other races each year from 2007 to 2019.
For example, in 2019 those white households had median balances of about $164,000, which were about twice that as households of all other races (about $80,300)."
Furthermore, AARP reports that approximately 53% of Black workers lack access to employer-sponsored retirement plans, compared to 42% of white employees. For Latino workers, the percentage of those lacking access is even higher at 64%.
Additionally, just over one-third of Black adults reported having a financial advisor, compared to 44% of all Americans. This discrepancy is further compounded by the challenge of finding advisors with a shared cultural background and viewpoint with Black families, given that fewer than 2% of certified financial planners are Black.
There can only be one conclusion: It is time to address racial disparities in retirement readiness!
B] Strategies sponsors can implement
1] Economist Impact found that poor benefits communication hindered utilization, with minority employees disproportionally reporting difficulty taking full advantage of available benefits.
2] Provide targeted outreach and education. Offer targeted financial education programs that address the specific needs and challenges faced by minority workers.
3] Promote one-on-one meetings with financial advisors. Encouraging personal meetings with financial advisors can build trust and provide tailored advice, enabling minority workers to better navigate retirement planning.
4] Implement auto features and matching contributions. Instituting automatic enrollment in retirement plans and auto- escalation of contributions can significantly increase participation rates.
Moreover, providing matching contributions incentivizes employees to save more by leveraging employer contributions, which compound over time to increase their retirement savings.
5] Provide emergency savings support. Use pension-linked emergency savings accounts (PLESAs) to help minority households better respond to financial emergencies and avoid withdrawing funds from their retirement accounts to pay for unplanned expenses.
C] The result?
While these strategies are critical steps toward narrowing the gap, addressing this important and complex issue will require a comprehensive, multi-pronged approach with sustained commitment and collaboration across sectors to create a more equitable and inclusive financial landscape for future generations.
This includes expanding access to retirement benefits, investing in community-based financial education initiatives and increasing diversity within the financial services industry.
By recognizing the needs and challenges faced by minority workers and implementing inclusive solutions, employers can play a pivotal role in fostering greater financial security and retirement readiness for all employees, regardless of race or ethnicity.
D] EU Policy On Equal Payment
The EU wants to strengthen the principle of equal pay for equal work between men and women through new EU rules on pay transparency. The Council has adopted new rules on pay transparency on 24 April 2023. This EU directive aims to combat pay discrimination and help close the gender pay gap in the EU.
Under the new rules, EU companies will be required to share information on salaries and take action if their gender pay gap exceeds 5%. The directive also includes provisions on compensation for victims of pay discrimination and penalties, including fines, for employers who break the rules.
You may ask: How can EU rules on pay transparency benefit EU citizens? New rules on pay transparency should help tackle pay discrimination at work and contribute to closing the gender pay gap.
Pay transparency can support workers' empowerment to enforce their right to equal pay for equal work or work of equal value between men and women through a set of binding measures.
Lack of pay transparency has been identified as one of the key obstacles to closing the gender pay gap, which remains at around 13% on average in the EU in 2020. This means that women earn on average 13% less than men per hour, (Eurostat data from 2021).
The pay gap has a long-term impact on the quality of women’s lives, on their risk of exposure to poverty and on the persisting pension pay gap, which is at around 30% in the EU, (Eurostat data from 2023).
The new rules will make it compulsory for employers to inform job seekers about the starting salary or pay range of advertised positions, whether in the vacancy notice or ahead of the interview.
Employers will also be prevented from asking candidates about their pay history.
Once in the role, workers will be entitled to ask their employers for information about:
• average pay levels, broken down by sex, for categories of employees doing the same work or work of equal value
• the criteria used to determine pay and career progression, which must be objective and gender neutral
Companies with more than 250 employees will be required to report annually on the gender pay gap in their organization to the relevant national authority. For smaller organizations the reporting obligation will take place every three years. Organizations with less than 100 employees won't have any reporting obligation.
If the report reveals a pay gap of more than 5% that cannot be justified by objective, gender-neutral criteria, companies will be required to take action in the form of a joint pay assessment carried out in cooperation with workers’ representatives.
Under the new directive, workers who have suffered gender pay discrimination can receive compensation, including full recovery of back pay and related bonuses or payments in kind.
While the burden of proof in pay discrimination cases has traditionally fallen on the employee, it will now be up to the employer to prove that they have not violated EU rules on equal pay and pay transparency. Penalties for violations must be effective, proportionate and dissuasive and will include fines.
For the first time, intersectional discrimination (the combination of multiple forms of inequality or disadvantage, such as gender and ethnicity or sexuality) has been included in the scope of the new rules. The directive also contains provisions ensuring that the needs of workers with disabilities are taken into account.
Pay transparency should allow workers to detect and challenge possible discrimination between women and men. Gender bias in pay systems and job grading that does not value the work of women and men equally and in a gender-neutral way is very common.
Since such bias is often unconscious, pay transparency can help raise awareness of the issue among employers and help them identify discriminatory gender-based pay differences that cannot be explained by valid discretionary factors and are often unintentional.