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Nearly half of all workers are not contributing to a retirement account. An estimated 3.65 million workers do not have access to an employer-provided retirement plan, and minorities are particularly vulnerable.

In this Third Way policy report, the authors propose implementing a “minimum pension” law to guarantee that every worker has adequate retirement savings. The plan proposes that employers not already offering a retirement plan contribute a mandatory, minimum 50 cent contribution for every hour an employee works. Over a year, these employer contributions would amount to $1,000 for a full-time worker. To nudge participation, employees would contribute 50 cents by default but retain the right to opt out or raise contribution levels. Employee and employer contributions would go into an automatic IRA or privately managed individual account, and employees would have similar investment options as the Thrift Savings Account for federal workers. The program would include a 10 percent early withdrawal penalty to prevent early cash outs or leakage, and small businesses (up to 100 employees) would receive a tax credit to offset costs.

Over the course of a career, which presumes a work history from age 22 to age 67, a worker would gain around $160,000 in today’s dollars. This amount doubles to $320,000 if the worker also contributes 50 cents over the course of a career. Overall, the program would produce a significantly larger nest egg, especially for employees who currently have little to no retirement savings.