Anti-pension opponents and lawmakers often repeat some versions of the refrain ‘Young workers aren’t interested in pensions.’ But who are they asking? Is this anecdote grounded in data? Do young people even know the difference between a pension and a 401(k)? This cliché seems to fit certain legislators’ political agendas rather than accurately reflect young workers’ views. As we explore the importance of public pensions, especially in today’s economic landscape, it becomes evident why these benefits are essential for younger public employees.

The Divide Between Generations

Previous generations, particularly the Silent Generation (born between 1925 and 1945) and  Baby Boomers (born between 1946 and 1964), were privileged to have the security of defined-benefit pension plans, which offered a clear path to a secure and often comfortable retirement. In contrast, younger generations such as Generation X (born 1965-1980) and Millennials (born 1981-1996) have encountered economic turbulence, including the Great Recession (2007-2009) and the ongoing impacts of the COVID-19 pandemic (since 2020), making it challenging for them to attain similar financial security. In addition, the soaring costs of education and housing have further intensified the economic uncertainties that today’s younger workforce faces.

Today’s retirement discussions are often led by older generations who are comfortable in homes many of them are fortunate to own–and an even greater share of whom have benefited from a guaranteed pension directly or indirectly. Yet, some still question whether the younger generations need access to the same benefits. This seems incredibly out of touch coming from people like Alaska Governor Mike Dunleavy, who has benefitted directly from the systems he is now arguing against. This raises significant concerns about the equity and forward-thinking necessary in our policy-making, particularly when it affects those beginning to navigate their financial futures.

The Financial Literacy Gap

A significant barrier to appreciating the value of pensions is the widespread lack of financial literacy among Americans. Many educational institutions fail to impart crucial financial knowledge, leaving many young workers ill-prepared to make informed decisions about their futures. Market Watch reports that only 57% of U.S. adults are considered financially literate, revealing a deep divide in basic economic understanding that varies significantly by region and demographic. Over 40% of Americans are unfamiliar with essential financial tools such as Roth IRAs, money market accounts, and high-yield savings accounts. 

These gaps in financial knowledge represent a critical deficiency that significantly impacts young workers’ ability to understand or make decisions about financial benefits such as pensions. Without a basic understanding of how pensions and other retirement plans work and the security they provide, younger generations face a notable disadvantage in planning for retirement and achieving broader financial empowerment.

Instead of exploiting this knowledge gap to advance their agendas, lawmakers and pension critics should prioritize enhancing financial education. The goal should be to empower workers with the necessary skills to secure their financial futures rather than devise policies that might leave them feeling deceived later. Leaders need to advocate for and implement policies that promote a thorough understanding of personal finance, preparing all Americans to make well-informed decisions about pensions and other retirement options. These efforts strengthen not only individual financial stability but also the economic resilience of communities and the American economy.

Pensions are a Benefit for Young Workers

Pensions are an essential benefit for young workers, particularly in light of today’s financial landscape. Many young adults today begin their careers burdened with substantial student loan debt and face significant expenses associated with life’s first big purchases, such as cars and homes. This financial pressure makes it difficult for them to prioritize saving, often placing retirement planning on the back burner. Under these circumstances, setting aside money for retirement can seem like a luxury rather than a necessity, as the immediate goal for many is to reduce or eliminate their debt. 

Public sector employees are particularly vulnerable, often receiving lower salaries than their peers in the private sector. Since their capacity to save might be limited by lower income levels, having access to a defined benefit pension plan ensures that they are still preparing for retirement without heavily reducing their already limited income.

According to a National Institute on Retirement Security (NIRS) report, two-thirds of working millennials have nothing saved for retirement. In this context, defined benefit pension plans become especially valuable. Unlike defined contribution plans, where the benefits depend on investment returns and the individuals know how to actively manage investments, defined benefit plans provide a guaranteed payout upon retirement. This predictability is a significant advantage, offering a sense of financial security and stability that can be hard to find elsewhere. For young workers, knowing that they are accumulating retirement benefits through their employment and that qualified professionals make pension fund investments can alleviate some of the anxiety associated with financial planning and future uncertainty. This setup not only aids in immediate financial management but also contributes to long-term economic stability, making public sector positions more attractive to young professionals concerned about their financial futures.

The Path Forward

Instead of undermining pension systems by presuming younger workers lack interest in such benefits, public employers and lawmakers must collaborate to reinforce these crucial support programs. Educating workers and future employees about their retirement options is essential, as it ensures they understand the value and mechanics of pensions. Additionally, strategically leveraging benefits such as pensions can be a powerful recruitment and retention tool. This approach does more than attract top talent; it secures a committed workforce that can sustain the high-quality public services our communities rely on.

Contrary to the misleading anecdotes pushed by pension opponents, polling indicates that informed Generation X and millennial workers want defined benefit pensions. 69% of Generation X and 67% of Millennial poll respondents agree that pensions are better tools for retirement security than defined contribution plans. 

By cultivating a well-informed workforce that values the security pensions provide, we safeguard not just the financial future of the younger generation but also the strength of our public institutions. This strategy not only addresses immediate workforce needs but also establishes a groundwork for long-term societal stability and growth.