Family Finances

It Isn’t Recovery Unless We Rebuild Worker Financial Security

July 26, 2021  • Elizabeth Vivirito

Rebuilding the economy can stabilize families if it includes a better benefits system.

For the first time in decades, workers have some leverage. A growing awareness of the importance of job quality to entice people back to work has left employers and policymakers in novel territory: To attract workers, employers must attend to their full needs. Childcare and dependent care, healthcare, and paid leave are becoming as “essential” as the people who provide them.

If we want our economy to grow and thrive, workers are making it clear: We must center their whole financial security. Piecemeal solutions addressing labor shortages miss the larger opportunity. Let’s build a better economy — one in which pay, benefits, and a safety net when people need it work together. If we do this, we’ll not only be addressing people’s short-term stability to recover from this pandemic — we’ll be building a resilient economy that helps us all weather what’s to come.

The supports people need, when they need them

We don’t typically think about the design and delivery of “benefits” as a system in America. Yet, public and private benefits are foundational to households’ ability to achieve financial security. According to the Aspen Institute’s definition of financial security, people need three things: routinely positive cash flow, personal resources, and public and private benefits. Benefits do what income and savings can’t — they help protect from major financial shocks and enable people to pursue long-term security.

Yet our current benefits system — which includes both public and private benefits — is outdated and inadequate, undercutting the financial stability of people across the income spectrum. Benefits today are typically working well for only one set of workers – full time, high-wage earners who don’t lose — or leave — their jobs. Even for this set of people, health insurance, paid leave, retirement, and child and dependent care can vary dramatically from job to job.

Black, Latinx, Indigenous, and other workers of color have historically been denied access to the set of jobs with the highest wages and best benefits. Without the same access to high-wage jobs with full benefits packages, workers of color have been denied access to invest in opportunities, like building wealth, or pursuing higher education.

What a better system could look like

Until now, the designers and administrators of our benefits — human resource professionals, benefits providers and consultants, large employers, small business owners, federal and state policymakers, philanthropy, and more — haven’t taken stock of what the “benefits system” is or how it works in people’s lives, holistically. In fact, calling it a “system” when it doesn’t work together in an integrated way for workers is being generous. 

Here at the Aspen Institute Financial Security Program we’ve spent the past two years convening experts and listening to workers themselves to consider how to redesign the current benefits system to better support American families. We believe a modernized system of benefits must correct four limitations.

The system is not equitable: Benefits are not reaching enough people with the kinds of support they need. As our research makes clear, only one kind of worker — full-time, high income — receives workplace benefits that enable them to improve financial security. Often, higher-income individuals have access and choice in selecting private benefits that work well for them; lower-income households are forced to “take or leave” public benefits that are complex to navigate and insufficient in helping build financial security.

The fix: A new system must be inclusive, protecting all workers, irrespective of their work arrangement and employment status.

The benefits are not people-centric: Public and private benefits do not play nicely together. Each is actually a hodgepodge of hundreds of separate programs, administrators, and eligibility requirements. Some employers offer more choice — and cost-sharing — than others. The onus is on workers to navigate many different programs, which are often not designed to help workers build financial security, but to plug short-term gaps. For example, asset limits and “benefits cliffs” force workers to choose between stability and mobility, turning down promotions so they won’t lose critical benefits like health care through Medicaid.

The fix: Designing benefits from a “people-centric” perspective, integrating offerings between private employers and public offerings to be responsive to changes in workers’ lives. Job transitions, periods of unemployment, and saving up to invest in one’s future are all expected behaviors for workers, and we can design benefits to be responsive to those changes. Any system should serve workers, not states or employers, and any system should include the regular input of workers. Approaches like Springboard to Opportunities, in Jackson, Mississippi, and “social listening” put workers at the center of the design to ensure that the voice, needs, and expertise of the people who use the benefits guide the redesign. Importantly, we must design in a way that doesn’t just incorporate the voice and experience of workers but builds their power and influence in the process.

The computer systems are antiquated. Applying for public benefits is often extremely complicated and relies on computer systems that are so creaky they don’t work for people in need or policymakers. When policymakers expanded unemployment insurance during the pandemic, they had to adopt a universal, flat $600 per week supplement instead of calibrating to worker’s financial needs because state computer systems couldn’t handle the calculations.

The fix: Public benefits need an upgrade. Our policies and technological systems should be people-centric and interoperable. Tech-enabled safety net organizations are setting an example that government should follow, using quantitative and qualitative data to improve program performance, designing for people who need benefits, and investing in technology that helps meet needs seamlessly. These changes free people up to live dignified lives.

Benefits are not portable:  Most workplace benefits are tied to the employer. That means workers must calculate whether they can afford to lose health insurance or retirement savings while looking for a better job.

The fix: Where you work should not determine what you have access to. Benefits should be connected to workers especially in an era of increasing subcontractor and gig work. State-facilitated retirement savings plans, for example, show us the promise of this approach. A handful of states have auto-enroll IRA programs — and they are proving effective at increasing participation. Access is facilitated by employers but  the account stays with the worker when they change jobs. The costs for employers are lower than if they created a program themselves.

If the country is to withstand the next economic downturn, public and workplace benefits must reflect the realities of 21st century employment and give workers the peace of mind that no matter what, they have the economic resilience to withstand change and with their financial stability contribute to the health of the larger economy.

To stay updated, sign up for our public and private benefits newsletter here, or read more about our vision for a modernized benefits system here.

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