In a previous post, we discussed the consequences for states that abandoned their pension plans. But gutting defined benefit pensions has consequences beyond unstable funding and decreased retirement security. A recent report by the National Conference on Public Employee Retirement Systems revealed another effect of slashing pensions: increased income inequality.
Over the past three decades, while the pay of top CEOs has increased 997%, those same CEOs have shifted their employees into risky 401(k) retirement plans, robbing a generation of their retirement security. In the public sector, too, NCPERS found that attacks on public pensions have increased income inequality.
The NCPERS study found that a single negative change to a public pension plan results in a 15% increase in income inequality in a given state. Reducing benefits or requiring workers to contribute more to their pension amounts to a loss of income for that worker, which only widens the gap between the average worker and the wealthy, who have gained an increasing share of income in the past three decades. State legislators need to be aware that gutting public pension plans is yet another contributing factor to the growing income inequality in this country.