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April 1998, Vol. 121, No. 4

Précis

Welfare, work, and transit
Time well spent
Retirement planning: today's workers must make more decisions

Précis from past issues

Welfare, work, and transit

 

Recent changes in social service programs mandate that States require parents or caretakers receiving welfare benefits engage in work within 24 months of receiving such public assistance. A recent study, Welfare Reform and Access to Jobs in Boston, Statistics of the U.S., from the Bureau of Transportation Statistics, Department of Transportation, outlines some of the challenges facing recipients trying to get to work and the transit systems trying to provide them an affordable transportation option.

 

The basic problem is that employers in the industries most likely to hire entry-level workers are often located in places both remote from where public assistance recipients live and difficult to travel to. Some suburban areas can only be reached by commuter rail, which is expensive and in many cases fails to provide direct service to the actual job site. Even when the public transportation system did provide direct access, the trip often takes too long or requires multiple transfers. Also, transit service hours may not match work schedules.

 

The report detailed a study of transit service from a central point in one area of Boston with a high concentration of public assistance cases to potential employers in high-growth areas for entry- level work. The findings were stark:

 

• Not one of the employers could be reached within 30 minutes by public transit.

• About 14 percent could be reached within 60 minutes.

• About a third could be reached within 90 minutes.

• Almost half could not be reached within 2 hours.

 

The report concludes that "technology innovations such as flexible routing, advanced paratransit services, and other applications of information technology" be considered for improving service, along with service innovations such as extended schedules, modified routes, and daycare services at transit stations.

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Time well spent

 

It has been some time since we have had much fun here at BLS with price data and the cost of living. The Dallas Federal Reserve Bank, on the other hand, included an intriguing essay on "Time Well Spent: The Declining Real Cost of Living in the United States," in their 1997 Annual Report. The authors, W. Michael Cox and Richard Alm, rather than adjust prices to a basket of goods, normalized them to wages in manufacturing and expressed values in the working time required to purchase any of a wide range of goods and services. This allowed a number of useful comparisons of what they term the real cost of living, not "measured in dollars and cents but in the hours and minutes we must work to live."

 

• The most mind-boggling: In 1944, computer-processing capacity measured in millions of instructions per second (MIPS) cost 732,681 lifetimes per MIPS. In 1997, a MIPS went for 27 minutes worth of labor.

 

• The most useful: In 1920, the median house cost 7.8 hours of work per square foot. This fell to 6.5 hours in 1956 and to 5.6 hours in 1996. "Plus, today’s homes come equipped with many more amenities—from central heat and air-conditioning to a full range of kitchen appliances."

 

• The most factoidal: It takes less time to earn enough for a fast-food burger (9 minutes) than it takes to order it, find a table, and eat it.

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Retirement planning: today's workers must make more decisions

 

Since 1986, defined contribution retirement plans, such as the 401(k), have been offered more commonly to private employees than have traditional defined benefits plans. According to a recent Federal Reserve Bank of New York staff report, How Workers Use 401(k) Plans: The Participation, Contribution, and Withdrawal Decisions, by William F. Bassett, Michael J. Fleming, and Anthony P. Rodriguez, this is part of a trend toward an increasingly responsible role for individual workers in retirement planning. They conclude, however, that "many either are not participating or are participating in a minor way." Fully a third of workers offered 401(k) plans decline to participate, they say. They find further that among workers with family incomes under $15,000 per year, almost two-thirds are not using the plans offered them.

 

Bassett, Fleming, and Rodriguez also find that of the nearly half of workers who report taking a lump-sum distribution from a retirement plan before retirement age, only 28 percent roll the funds into tax-qualified retirement accounts. Again, lower income workers are least likely to participate in the tax-qualified retirement option. Because their data source did not measure household assets or savings, they did not draw definitive conclusions about how well workers’ retirement plans would support future consumption. They did conclude however, that their findings should "raise concern that many workers may not be adequately saving for their retirement years."

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