When I met with our publications team last month to discuss content in the works for this edition of Workspan, the title of a specific article jumped out at me. What was the title, you ask? “Your Retirement Plan May Be Fostering Inequity: Here’s How to Fix It.” Why did that topic grab my attention? The answer is quite simple. As total rewards and HR professionals, we seem to be at another intersection when it comes to equity. Perhaps more to the point, the working world itself seems to be at another crossroads with equity, and it’s a significant part of our charter as professionals to address the issues.
Have we gotten it right yet? What is missing? How do we move forward in a way that’s positive, meaningful and impactful for the people who are the most important resource for every organization? These are weighty questions.
Why have I been so focused on these issues? It feels like whenever I pick up a newspaper, turn on the TV or read an article on my phone, the common and recurring theme is that there is some form of inequity at work that is affecting people’s long-term livelihood and ability to thrive. We’ve been working to address these issues as a community for decades, so why do they remain such a challenging aspect of work?
Shortly before reviewing Workspan plans, I got a preview of the main narrative elements of WorldatWork’s 2024-2025 Salary Budget Survey that will be discussed at a forthcoming digital event on Aug. 13. This year’s Salary Budget Survey finds: “Seventy percent of this year’s participating organizations expect to make pay adjustments for pay equity reasons. These adjustments may include both those required to maintain internal equity among employees as well as those needed to resolve unwarranted differences in pay between different groups of workers.” Seventy percent. That number highlights the work we’re doing as well as the gravity of the problems with which we’re dealing.
On one hand, that number signals that professionals and organizations are coming together to address the issues. As a long-time HR professional and self-declared work nerd who fundamentally wants to make work better for everyone, it makes me feel exceptionally proud that this community is answering the call to action to address and prevent inequities across our systems.
Yet are we doing enough to address the different ways inequities affect people at work — their livelihoods, development, access to benefits, sense of well-being and ability to ultimately retire in a secure fashion? When, in one week, I read about the large number of organizations planning to make pay equity adjustments and that retirement plans may be fostering inequity, it becomes clear there’s so much more to do — and this is the time to further rally and commit to action.
Total rewards professionals are uniquely positioned to understand and address what’s working — and what’s not — about work. We’re constantly analyzing and adjusting the different elements that both create and support a balanced approach to rewarding people in totality for their work.
Rewards are their own small ecosystem. If there is an inequity in one place (let’s say compensation), we may first discover its effects in an entirely different area of employee experience (for example, in an employee’s health and well-being) or even in the programs that are meant to help people prepare for retirement.
Rewards are their own small ecosystem. If there is an inequity in one place, we may first discover its effects in an entirely different area of employee experience.
Connecting the dots, understanding the causes and effects, and then rebalancing our approach is the only way to create systems that are fair for everyone. In a recent article I wrote on the topic of equity, I mentioned that we can reward the way forward. In many ways, it may not be possible to craft “total” rewards without equity at the foundation of our programs and practices. When we approach each element of total rewards through an equitable lens, we’re centering the diverse needs of people in our organizations, as well as bringing balance and fairness to each area of our employee experience.
Together, let’s do a deep dive into issues people are facing with retirement because such programs are really a culmination of work experience. People work approximately one-third of their lives, and if the system is fair for that large amount of time worked, it stands to reason that people should aspire to — and achieve — a comfortable retirement, right? It’s well documented that while a growing number of Americans want to “retire by 60 and live to 100,” it’s not always possible. In other words, they want to be retired for more than one-third of their lives. Affording that dream, or any dream really, is now a “luxury” that many cannot begin to consider. Full retirement is something that many people don’t see as a possibility, and the generational, racial, gender and economic differences in outlook are clear.
Many factors have contributed to what’s referred to as a generationally “deteriorating retirement outlook” in the United States. Policy changes, the shift to defined contribution retirement plans from pensions, longer lives, back-to-back “once-in-a-lifetime” crises, caregiving for multiple generations, greater student loan debt burdens, exponentially higher costs of living and housing, inequities in retirement savings and more have all led to an erosion in comfortable retirements. Each generation born after 1964 faces a worsening wealth and retirement outlook. In fact, there’s a lot in front of younger generations: GenZ is starting out their working lives earning less than millennials did a decade ago, accumulating more debt and experiencing higher delinquency rates.
What’s more, even though women and men may have the same access to retirement plans through work, women lag in the amount they contribute to these accounts and their overall level of savings, with a median 401(k) account balance that’s 65% lower than that of men. You can largely blame the gender pay gap and career breaks for caregiving for women’s retirement savings shortfall, data shows.
The reality is: People don’t end their careers with a pay and savings gap that has suddenly affected their financial well-being. And, as our Workspan article explores, well-meaning employer contributions to retirement plans lean heavily toward top earners, especially given certain plan designs — rather than to the lower-earning workers who may need more incentive to participate and save.
To make sure that our rewards are indeed total and fair for everyone, let’s address the systemic issues and map out how our rewards elements affect one another. Among other things, that can mean addressing the pay equity gaps that compound over time, affecting a person’s ability to save, as well as assessing and ameliorating often baked-in inequities in the retirement plan design itself.
If there’s one thing that I know for sure, it’s that it’s our job to make total rewards fair and equitable for everyone who works and to meet people where they are. If we’re not addressing these issues head on, and in their totality, we’re not designing or implementing rewards that are total.
Editor’s Note: Additional Content
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