Retirement Crisis?

I have seen a lot of articles over the past few years regarding the impending US retirement crisis and stagnant wages . The general theme is that a crisis is brewing because companies no longer provide traditional pensions and have pushed the retirement savings responsibility over to workers. It is compounded by a lack in strong wage growth. As most people know its up to the individual worker to save for retirement through a 401k and IRAs with the backstop being social security. Pensions are a thing of the past. 

Here is some food for thought I wrangled from the Fed reserve board database.


The chart above shows the labor participation rate (blue line) is decreasing slightly while the employment rate of people 55 years of age and older is increasing (red line). Is this related to the lack of pensions and the rise of self funded retirements or just a coincident?  

The reason for this could be for many of reasons, baby boomers like to work, perhaps they must work because of a lack of retirement funds or the retirement savings they have are not adequate due to longer life expectancies. Will this trend continue on with future generations, if so this could be a real problem for those entering the workforce as they will have to compete with older workers with more experience.

In the second chart you see that GDP per capita is increasing at a greater rate than median income, and may overtake it in the near future. This means as the workforce becomes more productive it is not being compensated for increased performance. Most notably productivity has made great gains since the great recession of 2008/09. Companies shed millions of workers and then seem to have hired them back at lower wages. That’s why the unemployment rate is low, productivity high and median income stagnant. Companies are paying less for more work.  

I’m not an economist but this makes sense in my mind. An example is that when the recovery began in 2010 I saw many job openings in the banking sector looking for entry level jobs that required 5+ years of experience. How can it be entry level but experience is required?  At the time it told me that corporations were hiring back experienced workers for less pay and those workers were willing to take it because any job was better than no job.

So are we headed towards a retirement savings crisis? I think it is likely, especially if you look into the savings and net worth held by young and middle aged households.

What say you?