Failure to adjust: The case of auto-IRA

Recently, I imagined, with a nod to the Universal Basic Income movement, the outlines of a more modest, work-oriented Universal Adjustment Benefit that could help workers navigate an era of constant labor market “disruption” by making some basic work, training, and safety net supports universally available.

Granted, no such benefit will be forthcoming any time soon. But there is a great need for such a reimagined set of worker re-training and safety net supports—not least given the spread of the online “gig” economy and other forms of “contingent,” often low-benefit, work that ensure that large swaths of the workforce no longer enjoy the benefits associated with full-time employment.

Which is why, this spring, I got interested in the nascent “auto-IRA” movement—a smart, post-partisan effort by a number of cities, counties, and states (encouraged over the years by both Heritage Foundation and Brookings scholars) to help low-wage workers without access to employer-sponsored retirement plans save money in government-sponsored plans. Here, it seemed, was an example of exactly the kind of enlightened adjustment policy needed in the U.S., actually being implemented. Thanks to several Obama administration rule clarifications, cities like Seattle, New York, and Philadelphia, and states like California, Maryland, and Oregon were moving ahead to organize retirement saving accounts for workers that could fill a yawning gap in the nation’s safety net at a time of contingent work. Maybe the nation’s cities and states really would be able to piece together some of the needed safety net supports for workers on their own—and in the near term.

Or not. As it happens, the encouraging automatic IRA movement is now in jeopardy, stymied by Republicans in Congress and President Trump. Last month, Trump signed a measure passed by one vote in the Senate repealing the earlier permission for city and county savings programs. And now the state programs are in question given the Senate’s additional vote last week rolling back a separate regulation for states. The upshot: In the absence of constructive federal action on the safety net, the 55 million Americans who work without an employer-sponsored retirement plan appear likely to also be shut out from bottom-up city and state relief.

This is frustrating—both as a set-back for progress on adjustment policy and as an expression of hyper-partisan, selective federalism. While the realities of worker mobility and the benefits of scale argue for national adjustment and safety net solutions, those solutions have been slow to come—and will apparently be hard to sustain, as witnessed by last week’s House vote to repeal and replace Obamacare. Which is troubling in itself.

Yet at the same time, the auto-IRA example also reflects an active and ugly drive to contravene experiments and preempt bottom-up problem-solving. Nor is this only a matter of political theory and small experiments. Rather, real potential progress is at stake. Note, after all, that the threatened Labor Department rules were designed to give access to retirement accounts to around 13 million people in five states—a cohort that represents nearly a quarter of the nation’s population that lacks a retirement account. In other words, Congress is here not only neglecting to solve a major national problem, but is actively barring cities and states from stepping into the breach and shouldering the burden themselves.

All of which bodes poorly for the cause of assembling a modern set of worker transition, adjustment, and safety net policies in the foreseeable future. Not only will Universal Adjustment Benefit not be developed anytime soon, but cities and states will not be able to achieve incremental progress easily.