Reflection inevitably follows every year’s end, and when economist Teresa Ghilarducci looks back over 2012, it’s a pretty good view. Last fall, California governor Jerry Brown signed into law legislation that would provide a retirement savings plan for millions of the state’s private sector workers. Passage of this proposed plan was an impressive achievement for Ghilarducci, chair of the economics department at The New School for Social Research. As the author of Guaranteed Retirement Accounts, her policy proposal served as a model for the California legislation. Ghilarducci has been advocating for labor, pension, and 401(k) reform for over two decades, and California’s retirement reform is her latest success.
“This legislation will help millions of hard-working Californians save for retirement,” said Ghilarducci. “While Congress is exploring solutions at a national level, the passage of the California law is further recognition of the retirement crisis and the need to expand coverage to low- and moderate-wage earners.”
Labeled by the Sacramento Bee as a potential “national model for retirement savings” for Americans without pensions, the plan would ease people’s reliance on social security—which offers on average only $1,181 per month—by providing a guaranteed minimal return rate for contributions made by employees from their payroll checks.
Before it is implemented, the plan must pass a market study on feasibility to evaluate the program’s sustainability and financial risk to the public and private sectors. Money for the new retirement plan would be accumulated in a state-administered fund that would be monitored and invested conservatively. Unlike a public pension fund, the returns from the plan inspired by Ghilarducci are secured private insurance underwriters. If all goes well, the voluntary program will launch near the end of 2013.
Ghilarducci believes that sustainable retirement plans are a crucial component of a greater social promise—that all people deserve a period of relaxation after work. Her research explores the structural problems of our labor market caused by rising income inequality, which assumes that an unfair economy as an inefficient one.
For more information on Ghilarducci’s research, visit SCEPA’s website.