Can 401(k) accumulations generate significant income for future retirees?

This Issue Brief develops a model that project the proportion of an individual's preretirement income that might be replaced by 401(k) plan accumulations at retirement, under several different projected scenarios. The 401(k) participant behaviors in the model are based on the year-end 2000 database collected by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) in their collaborative effort known as the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. The most significant factor affecting projected replacement rates at retirement is having access to a 401(k) plan. Projected replacement rates from 401(k) accumulations at retirement are reduced significantly when participants are not offered a 401(k) plan in all portions of their careers. Most 401(k) participants tend to have contributions in any given year. Thus, projecting that participants always have contributions (their own and/or employer contributions) every year raises projected replacement rates, but not by much compared with the importance of being offered a plan to begin with. The model simulations show that participant activities such as taking loans, taking preretirement withdrawals, or cashing out account balances at job change reduce projected 401(k) accumulations and thus replacement rates at age 65. Because loans are forecast to be paid back to the account in full, their effect on replacement rates at retirement in the model is the smallest. Even if equity returns in the future are projected to replicate the worst 50-year segment in the Standard & Poor's (S&P) 500 history (1929 to 1978), 401(k) accumulations are still projected to replace significant proportions of projected preretirement income. Another projection scenario forecasts participants experiencing a simulated three-year bear market (negative equity returns) either early in their careers, near the middle of their careers, or at the end of their careers. Forecasts of the effects of bear markets on 401(k) balances show that a bear market in equities is projected to have the largest effect the closer it occurs to age 65 (retirement), even though older participants typically have diversified their portfolios away from equities. A three-year bear market for those early in their careers would reduce median replacement rates from 401(k) accumulations by an estimated 2.9-3.7 percentage points, compared with 13.4-17.7 percentage points for those immediately before retirement. Similarly, a simulated three-year bull market (positive equity returns) is projected to have a larger positive effect on projected account balances and replacement rates the closer it occurs to retirement.     

Why do spouses hide income?

This paper proposes a simplified model of intrahousehold decision making where cooperative and noncooperative behavior are not mutually exclusive. Individuals choose the optimal share of income they wish to devote towards cooperation, where income is pooled and allocated collectively, and towards noncooperation, where income is allocated independently. Using the example of joint saving as an area of household cooperation, this model shows how limited autonomy and bargaining power can interact to create incentives for individuals to hide income. This result provides theoretical support for the call to collect survey data separately from individuals rather than from household representatives.     

Does philanthropy reduce inequality?

Wealthy individuals often voluntarily provide public goods that the poor also consume. We show that, rather than reducing it, such philanthropy may aggravate absolute inequality in welfare achievement, while leaving the change in relative inequality ambiguous. Additionally, philanthropic preferences may increase the effectiveness of policies to redistribute income, instead of weakening them. Our results thus suggest that philanthropy and direct redistribution may often be better viewed as complements, rather than substitutes, in the context of inequality reduction. In so doing, they also bring into question the general normative case for large tax deductions for charitable contributions.     

Does performance management affect nurses’ well-being?

AimThis article focuses on employee performance-management practices in the healthcare sector. We specifically aim to contribute to a better understanding of the impact of employee performance-management practices on affective well-being of nurses in hospitals. Theory suggests that the features of employee-performance management (planning and evaluation of individual performances) predict affective well-being (in this study: job satisfaction and affective commitment).MethodsPerformance-management planning and evaluation and affective well-being were drawn from a survey of nurses at a Flemish hospital. Separate estimations were performed for different aspects of affective well-being.ResultsPerformance planning has a negative effect on job satisfaction of nurses. Both vertical alignment and satisfaction with the employee performance-management system increase the affective well-being of nurses; however, the impact of vertical alignment differs for different aspects of affective well-being (i.e. job satisfaction and affective commitment).ConclusionPerformance-management planning and evaluation of nurses are associated with attitudinal outcomes. The results indicate that employee performance-management features have different impacts on different aspects of well-being.     

Multidimensional time and income poverty: well-being gap and minimum 2DGAP poverty intensity – German evidence

This paper focuses on interdependent multidimensional poverty of time and income with its incidence and intensity. We introduce a Two Dimensional Minimum Poverty Gap (2DGAP) measure, which quantifies the shortest path to escape multidimensional poverty. The 2DGAP disentangles single poverty attribute gaps while assuring their interdependence; an important issue for targeted antipoverty policies. Besides income, we include genuine personal leisure time with social participation reflecting Sen’s capability approach. The interdependence of multidimensional poverty is estimated by a CES-type well-being function with individual German data. The empirical results of Germany’s “working poor” emphasize the importance of time with social participation aspects in the multidimensional poverty discussion.     

Does income inequality contribute to credit cycles?

Recent literature presented arguments linking income inequality to the financial crash of 2007–2008. One proposed channel is expected to work through bank credit. I analyze the relationship between income inequality and bank credit in a panel cointegration framework and find that they have a long-run dependency relationship. Results show that income inequality contributed to the increase of bank credit in developed economies after the Second World War.     

Do family policy regimes matter for children's well-being?

Researchers have studied the impact of different welfare state regimes, and particularly family policy regimes, on gender equality. Very little research has been conducted, however, on the association between different family policy regimes and children's well-being. This article explores how the different family policy regimes of twenty OECD countries relate to children's well-being in the areas of child poverty, child mortality, and educational attainment and achievement. We focus specifically on three family policies: family cash and tax benefits, paid parenting leaves, and public child care support. Using panel data for the years 1995, 2000, and 2005, we test the association between these policies and child well-being while holding constant for a number of structural and policy variables. Our analysis shows that the dual-earner regimes, combining high levels of support for paid parenting leaves and public child care, are strongly associated with low levels of child poverty and child mortality. We find little long-term effect of family policies on educational achievement, but a significant positive correlation between high family policy support and higher educational attainment. We conclude that family policies have a significant impact on improving children's well-being, and that dual-earner regimes represent the best practice for promoting children's health and development.     

Status inequalities, perceived discrimination, and eudaimonic well-being: do the challenges of minority life hone purpose and growth?

Considerable prior research has investigated links between racial/ethnic status and diverse aspects of mental functioning (e.g. psychological disorders, quality of life, self-esteem), but little work has probed the connections between minority status and eudaimonic well-being. Derived from existential and humanistic perspectives, eudaimonia describes engagement in life challenges and is operationalized with assessments of purpose in life, personal growth, autonomy, environmental mastery, self-acceptance, and positive relations with others. Using Midlife in the United States (MIDUS), a national survey of Americans aged 25-74, plus city-specific samples of African Americans in New York City and Mexican Americans in Chicago, minority status was found to be a positive predictor of eudaimonic well-being, underscoring themes of psychological strength in the face of race-related adversity. Perceived discrimination was found to be a negative predictor of eudaimonic well-being, although such effects were gender-specific: it was women, both majority and minority, with high levels of discrimination in their daily lives whose sense of growth, mastery, autonomy, and self-acceptance was compromised.     

International income poverty measurement: which way now?

We critically review conceptual and empirical issues surrounding the derivation of the international poverty line, expressed in PPP-adjusted dollars and linked to various rounds of the International Comparison Program (ICP). We find that there are some limitations in the current estimation of these lines, but show that statistically superior methods lead to lines that are relatively robust and confirm the $1.25 using 2005 PPPs and suggest $1.67–1.71 using 2011 PPPs (or close to the $1.90 proposed by the World Bank if we follow the World Bank’s approach of adjusting inflation rates in some countries); they also roughly confirm the current shape of the proposed ‘weakly relative’ poverty line. Using the new absolute line based on 2011 PPPs would lead to substantially lower poverty in our estimation. The extent of the decline depends on whether and how one treats China, India, and Indonesia differently from other countries in the 2005 and 2011 PPPs. More seriously, we note that the dependence on successive ICP rounds creates conceptual and empirical problems that have become worse over time so that we suggest that it would be best to consider alternatives to the current reliance on ICP rounds and the resulting PPPs. As a short-term solution we propose to fix the international poverty line in national currencies using either the 2005 or 2011 level; in the medium term, we argue for global poverty measurement based on internationally coordinated national poverty measurement.     

Does income inequality harm health? New cross-national evidence

The provocative hypothesis that income inequality harms population health has sparked a large body of research, some of which has reported strong associations between income inequality and population health. Cross-national evidence is frequently cited in support of this important hypothesis, but the hypothesis remains controversial, and the cross-national work has been criticized for several methodological shortcomings. This study replicates previous work using a larger sample (692 observations from 115 countries over the 1947-1996 period), a wider range of statistical controls, and fixed-effects models that address heterogeneity bias. The relationship between health and inequality shrinks when controls are included. In fixed-effects models that capture unmeasured heterogeneity, the association between income inequality and health disappears. The null findings hold for two measures of income inequality: the Gini coefficient and the share of income received by the poorest quintile of the population. Analysis of a sample of wealthy countries also fails to support the hypothesis.     

Welche Lohnungleichheiten sind gerecht?Which income inequalities are considered just?

This article examines the reasons for inequalities of earnings in Germany and the extent to which these inequalities are considered to be legitimate. We focus on three major inequality-generating factors derived from labour market and inequality research: individual, firm-specific and structural factors. We then investigate empirically the importance of these factors in the emergence of differences of earnings and the extent to which employees consider the rents of each factor to be just or unjust. Analyses based on data from the German Socio-Economic Panel reveal that wage differentials are considered as just if they can be attributed to individual factors (level of education, professional experience). In contrast, wage differentials due to firm-specific factors (atypical employment, seniority-based pay) and structural factors (certain occupational groups/industries, differences between regions) are the major reasons for perceived earnings injustice. The results of this study will contribute to the debate concerning increasing wage inequalities and reveal that distinguishing between just and unjust inequalities is essential, especially in discussions regarding the social or political consequences of this trend.     

Does writing reduce posttraumatic stress disorder symptoms?

To see if writing about their trauma lessened PTSD and related symptoms, 57 undergraduates, previously screened for traumatic experiences, wrote for 15 minutes on 4 days across 2 weeks about either their trauma or a trivial topic. They reported PTSD, impact, suicide ideas, dissociation, and depression pre-, post-, and at 6-week follow-up testing. Trauma and trivial writers were not different. Surprisingly, at follow-up everyone reported less severe PTSD symptoms, impact, and dissociation, and fewer health visits, but about the same suicidal ideation and depression. On PTSD symptoms and impact, the pattern of improvement was different: Those writing about trauma got worse at posttesting, but improved to better than their initial state by follow-up. Those writing about a trivial topic got better by posttesting, and held that position at follow-up. In this project, writing seemed to reduce PTSD symptoms regardless of whether it concerned the trauma or what they ate for lunch.     

Do comprehensive schools reduce social mobility?1

This paper investigates the claim that the shift from a selective to a comprehensive school system had a deleterious effect on social mobility in Great Britain. Using data from the National Child Development Study, we compare the chances, for both class and income mobility, of those who attended different kinds of school. Where media attention focuses exclusively on the chances for upward mobility of those children from lowly origins who were (or would have been) judged worthy of selection into a grammar school, we offer more rounded analyses. We match respondents in a way that helps us to distinguish those inequalities in mobility chances that are due to differences between children from those due to differences between the schools they attended; we look at the effects of the school system on the mobility chances of all children, not merely those from less advantaged origins; and we compare comprehensive- and selective-system schools, not merely comprehensive and grammar schools. After matching, we find, first, that going to a grammar school rather than a comprehensive does not make low-origin children more likely to be upwardly mobile but it helps them move further if they are; second, that grammar schools do not benefit working-class children, in terms of class mobility, more than they benefit service-class children, but, in terms of income mobility, such schools benefit low-income children somewhat more than they benefit higher-income children - that benefit relating only to rather modest and limited movements within the income distribution. Finally, however, the selective system as a whole yields no mobility advantage of any kind to children from any particular origins: any assistance to low-origin children provided by grammar schools is cancelled out by the hindrance suffered by those who attended secondary moderns. Overall, our findings suggest that comprehensive schools were as good for mobility as the selective schools they replaced.     

How Can Low‐income Countries Gain from a Framework Agreement on Climate Change? An Analysis with Integrated Assessment Modelling

By using the integrated assessment model RICE this article carries out a scenario analysis with different assumptions about international negotiations on climate change, in particular hypothesising about reduction in targets for greenhouse gas emissions, technology transfers and financial transfer programmes. It finds that, in terms of growth, developing countries and in particular sub‐Saharan Africa will benefit from agreements that reduce the level of pollution and promote technological diffusion. Moreover, when developed countries are subject to emissions limits and poor regions have no such commitments, financial transfers from rich to developing countries for adaptation and mitigation enhance pro‐poor growth and help the effectiveness of poor countries in reducing emissions.     

Contextualizing subjective well-being of children in different domains: Does higher safety provide higher subjective well-being for child citizens?

According to the United Nations Convention on the Rights of the Child, all children are born with civil, political, social and economic rights. However, children's ability to exercise their citizenship rights and practices depend on which country context they live in. Within the limits of this article we want to explore how children's subjective wellbeing is affected by the level of safety provided within the larger country context by using data collected by the consortium of the International Survey of Children's Well-Being. The question we elaborate is whether there is a relationship between the welfare context and subjective well-being of children with respect to different domains, and whether age and gender play a role. We first cluster welfare contexts with selected indicators from international reports among the selected countries of the Children's World Survey from high to low safety provided for children. Then, by referring to the existing literature, we propose six domains for analyzing children's subjective well-being: Health; Material conditions; Education; Risk and Safety; Relationships, and Self-perception. By analyzing each domain we ask whether there is a linear relation between the levels of safety welfare contexts and the subjective well-being of children in different domains and whether this hypothetical relationship exists after controlling for the age and gender of participants. According to our findings, high and medium welfare contexts provide higher subjective well-being in the domains of ‘material’ and ‘risk and safety’. Girls have lower subjective well-being in the low safety welfare context compared to boys. We also find that in the domains of education and relationship, girls' subjective well-being is higher than boys in every safety welfare contexts. Last but not least we also find that the high safety welfare context has a lower average in the self-perception domain and also there is gender difference, girls compared to boys are less satisfied with themselves.