81% of public sector workers worry about having enough money for retirement

A new report examines the value of employee benefits in the public sector, finding that overall, those benefits give public sector workers an edge in economic security, yet 81% worry about having enough money to last through their retirement.

The report, “Examining the Financial Wellbeing of the U.S. Public Service Workforce,” was issued by MissionSquare Research Institute, and presents a mixed picture of the public workforce and its economic security. On the one hand, public sector workers may report having trouble paying their bills and affording essentials such as health care. On the other, public-sector employees save more than private sector employees, and generally have a broader set of benefits than many private sector workers.

“Public employees often have job stability given that taxpayers rely on continuity in their essential public services—from public safety to education,” the report said. “This makes it easier to plan for the future, as workers can worry less about unexpected drops in incomes, with layoffs most common only in exceptional circumstances… Moreover, public employees often have strong employer-provided benefits, including defined benefit (DB) pensions, which encourage longer employment tenure.”

Some areas of financial insecurity

However, public sector employees, like many private sector employees, report having financial stress. In the report’s study period, from 2017 through 2019, 14% of households employed in the public sector said they couldn’t pay all their bills, and 19% said they skipped some health care because they could not afford it. By comparison, the Kaiser Family Foundation said in 2022 that 40% of all Americans said they skipped or delayed health care because of affordability concerns.

These financial insecurities may have gotten worse in recent years. The report noted that the traditional advantages that more generous benefits in public service work may have been diminished over the past two decades due to hard times like the Great Recession and the stock market crisis of 2001. “As a result, many state and local government employers or plan sponsors enacted changes to their DB pensions that raised contributions and cut benefits for new hires, which may have lowered the expected DB pension benefits relative to total employee and employer contributions,” the report said.

However, the study found that DB pension plans are still common among public service workers, after a long period when private sector employers largely switched to defined contribution (DC) plans. Overall, 59% of public employees have a DB pension plan, and 63% have either a 401(k) or 403(k) plan (these DC plans are largely available as a supplemental plan even if an employee has a DB pension). According to the U.S. Department of Labor Statistics, 68% of workers in the private sector had access to retirement plans in 2021, with 51% choosing to participate.

Better savings, more benefits strengthen employees’ security

Even given that some pockets of the public sector may be feeling economically insecure, the report found that, generally speaking, public sector benefits are helping to strengthen the financial security of public sector households.

“Psychology matters a lot,” said Christian E. Weller, PhD, professor and chair of the Department of Public Policy and Public Affairs, McCormack Graduate School at the University of Massachusetts Boston, who is one of the study’s authors. “We found that peace of mind in job stability is a massive contributor to people’s financial wellbeing. If people’s bills are paid now, they take a different attitude about saving for the future.” He added that the job security in the public sector is quite different than the private sector, where the trend has been toward a significant amount of disruption and turnover in employment. “Longevity in a job is a major contributor to people saving money and building wealth,” he said.

The bottom line, the researchers said, is that the public sector is well-positioned to deal with ongoing issues around financial security, because public sector employers have experience with offering a range of benefits and innovating with the types of benefits offered to employees.

“One broad theme of this research is the comprehensive nature of the benefits that state and local employers provide,” said Joshua Franzel, PhD, managing director of MissionSquare Research Institute. “There have been both traditional and non-traditional benefits offered, such as financial wellness, student loan forgiveness, and flexible workplace practices. Communicating the holistic value of these benefits will position local and state governments as employers of choice in a competitive labor market.”