Boomer and Millennial Public Workers Agree Pensions are a Plus

Differences between millennial and baby boomer employees have drawn attention in recent years. But within the state and local government workforce the two generations appear to have similar views when it comes to pension benefits, according to new research.

The National Institute on Retirement Security released survey results this week that show about 74% of millennial state and local employees said a pension benefit is a major reason why they chose a public sector job, compared to 70% of boomers.

Similarly, about 84% of millennial state and local workers said a pension benefit is a key reason why they stay in their jobs, while the same was true for about the same share of boomers.

There was some daylight between the responses from millennials and boomers on a question about whether their overall compensation package would be “very” or “somewhat” competitive if it didn’t have a pension and instead offered a retirement plan akin to a 401(k).

Fifty seven percent of boomers answered “no,” whereas only 33% of millennials said the same.

Boomers were born between 1946 and 1964 and millennials roughly between 1981 and 1996. Similarities in the views the two age groups voiced about pay and benefits mirrors other analyses that suggest generational differences between workers can be exaggerated. 

It’s also notable that millennials entered the workforce in an era when pension plans are exceedingly rare in the private sector and around the time of the Great Recession. Boomers with pension incomes, meanwhile, are likely to be in a better position than a significant share of their age cohort who are lacking in retirement savings.

“They know that a pension is valuable, they know that kind of security in retirement is valuable and is increasingly hard to find,” Tyler Bond, who manages research for the National Institute on Retirement Security and co-authored the report, said about the two age groups.

The new report features the results of online interviews conducted by a private research firm during August and September. Responses came from 1,118 employees, including 362 teachers, 284 police officers, 204 firefighters, and 268 other state and local workers.

Bond said similarities in the views of workers across generations was one thing that stood out to him about the survey results. (There’s also information in the report on Generation X, which falls between boomers and millennials.)

He said he was also struck by how overwhelmingly in favor of pensions the respondents were overall, how uncomfortable they were with the idea of cuts or changes to the benefits, and how many said that they planned to stick with their jobs until retirement.

About 93% of respondents said pensions incentivize public workers to have long careers in government and 94% said pensions are a good tool for retaining employees. 

Ninety-four percent of respondents also held favorable views of “defined benefit” pension plans that guarantee employees a certain level of benefits when they retire.

And 89% said they plan to stay with their current employer until they are eligible for retirement or can no longer work.

The health of public pension systems varies widely from place to place around the U.S. But some state and local governments have taken steps in recent years to shift additional risks and costs to public employees, and away from government balance sheets. 

In jurisdictions with troubled pension programs, the problems often stem from lawmakers shorting government contributions to the plans over the years, or promising beefed up benefits during labor negotiations that are beyond what a jurisdiction can afford. 

Plan managers making overly optimistic assumptions about the amount of money that the funds can gain from investment returns is another common pitfall.

The National Institute on Retirement Security is affiliated with groups that have a stake in seeing public pensions preserved. Its members include a number of pension funds, labor unions, and investment firms and consultancies with ties to the public pension world.

But the thrust of the group’s report aligns with other research that suggests while state and local workers could potentially earn more money in the private sector, their retirement and health care benefits help make their overall compensation packages more attractive.  

These sorts of findings raise the possibility that governments that cut back pension benefits due to cost concerns, or for other reasons, could be at a disadvantage recruiting and retaining workers compared to places that continue to offer more generous retirement programs.

Some states and localities around the U.S. have struggled in recent years recruiting and retaining certain types of workers, such as police and emergency medical services positions, and IT and engineering jobs where pay tends to be higher in the private sector.

Jurisdictions have responded by turning to “gig” or temporary workers to fill some jobs, while others have taken steps like streamlining hiring processes, emphasizing their “brands,” and developing new recruitment and professional development initiatives.

Bond pointed to a situation where public safety workers decamped from their jobs in the town of Palm Beach, Florida after local officials in 2012 shifted the pension system there away from a defined benefit model. The local government about four years later reversed course.  

“We’re seeing that there are clear workforce impacts when states make these changes,” Bond said.

“Public employees themselves are saying,” he added, “they would either definitely leave, or would be likely to leave, if their benefits were cut, or if their retirement plan design was changed.”