Tell me, what’s more attractive – a career that provides decent pay and a path to a reliable and secure retirement or decent pay and leaves your retirement future uncertain? It’s a no-brainer, right? Yet last week, the Reason Foundation, notorious for spreading rhetoric to serve its own agenda, claimed that pension benefits are not the key to attracting or retaining public workers. NPPC could not disagree more. While state and local government jobs often can’t compete with private sector base pay, they offer something far more valuable: a secure path to retirement through defined-benefit pensions. Let’s dive into why Reason’s claims miss the mark entirely.
In a recent article for Governing, the Reason Foundation rehashes fallacious claims that pension benefits are outdated and ineffective for attracting or retaining public workers in today’s workforce. Their points about recruitment and retention, the influence of generational changes, the COVID-19 pandemic, and so-called research are nothing more than desperate attempts to undermine traditional defined-benefit pensions. They even go as far as to suggest that pensions reduce worker quality–a laughable assertion that reeks of a blatant agenda.
Reason attempts to back up their claims with cherry-picked studies. For instance, they cite a Tennessee study that supposedly found traditional pensions led to accelerated retirement among teachers. Another flawed study in Missouri suggested that pension enhancements caused earlier retirements, thus reducing retention. In Washington state, a study found no significant difference in turnover between defined-benefit and hybrid plans but claimed lower turnover for those in hybrid plans. They also mention that younger workers in Florida reportedly preferred defined-contribution plans over traditional pensions.
But let’s get real. Reason’s argument conveniently overlooks critical facts and completely misinterprets the implications of these studies. They suggest that traditional pensions accelerate retirement and reduce worker quality, citing the Tennessee study. Seriously? This argument is absurd. When workers are vested after years of dedicated service, it’s their right to retire when they’re ready! It’s no secret that many state and local jobs are downright laborious and intense. Their so-called solution is to saddle workers with a retirement plan that they know will never allow them to actually retire?
In addition, one of the benefits of defined benefit pensions is workforce planning. Pensions incentivize workers to retire at predictable times. As we saw following the Great Recession, many older workers stayed in their jobs long after their normal retirement age because they couldn’t afford to retire. Then, millions left their jobs abruptly during and after the pandemic, leading to the workforce shortages we’re experiencing today. Pensions allow employers to make workforce decisions based on predictable, sound data.
Contrary to Reason’s assertions, a study by the National Institute on Retirement Security found that pensions actually contribute significantly to job satisfaction and long-term employment–with four in five millennials working in the public sector citing pensions as a reason for staying in their jobs. The stability provided by pensions ensures experienced workers remain committed until they’re ready to retire rather than leaving mid-career for better retirement benefits elsewhere. This continuity is crucial for maintaining the quality of public services, and it’s laughable that Reason can’t see it.
The Reason Foundation claims that younger workers prefer defined-contribution plans over traditional pensions. However, as we covered in a recent blog post, a lack of information can heavily influence these preferences. Market Watch reported that only 57% of U.S. adults are considered financially literate, and over 40% lack comprehension of financial tools such as Roth IRAs, money market accounts, and high-yield savings accounts.
When young workers understand the long-term benefits of pensions, they often prefer the security it provides. A National Public Pension Coalition survey found that when given the choice and full information, 67% of millennials understand that defined-benefit pensions provide better retirement security than 401(k) accounts.
Education about retirement benefits is crucial. Young workers may initially be drawn to defined-contribution plans due to their perceived flexibility, but this doesn’t negate traditional pensions’ long-term security and predictability. Once they grasp the value of a secure retirement, their preferences shift – but by then, it may be too late to benefit from the stability that pensions offer. The Reason Foundation’s argument overlooks this critical point, demonstrating a clear disregard for the financial well-being of future generations.
Reason argues that increased compensation and quality of life are public workers’ two most significant factors, not retirement benefits. While base compensation is undoubtedly important, and we certainly advocate for paying workers a comfortable wage, it doesn’t replace the need for a secure retirement or provide the long-term motivation needed to retain a quality workforce. Pensions offer a unique benefit that enhances the overall compensation package. The National Institute on Retirement Security (NIRS) found that pensions are a crucial factor in career decision-making for many public employees, balancing lower salaries with long-term security. The security of a pension plan is an invaluable part of the total compensation package, making public-sector jobs more competitive with private-sector offers. It’s not just about the paycheck today; it’s about ensuring public servants aren’t left in the lurch when they finish their careers.
Reason’s arguments against traditional pensions overlook the holistic value these benefits provide. Pensions support individual financial security and contribute to a stable, predictable, and motivated workforce, which is critical for effective public service delivery. Pensions also deliver a stable infusion of dollars into state and local communities. They remain a vital tool for attracting and retaining public sector talent by providing a secure retirement path that balances the lower pay typically found in government jobs. Policymakers must prioritize these benefits alongside competitive pay to build a dedicated and experienced public workforce capable of meeting our communities’ needs. Secure retirement isn’t just a perk – it’s a promise that makes our public service sector strong and resilient.
The Reason Foundation’s claims are nothing but smoke and mirrors designed to push an agenda that undermines the security and stability of public workers. It’s high time we see through their rhetoric and recognize pensions’ invaluable role in attracting and retaining top talent in the public sector. Stand firm and advocate for policies that support our public servants, ensuring they have the secure retirement they deserve. A secure retirement isn’t just a benefit; it’s the foundation of a stable, dedicated, and experienced public workforce. Don’t let the misleading arguments of the Reason and other anti-pension opponents jeopardize the future of our public servants and, by extension, the communities they serve. Stand up for pensions – because a strong public sector is built on the promise of a secure retirement.
But as we say, you can’t reason with Reason!
