With states and cities struggling to balance their budgets, pressure is increasing on employee benefits. Now the National Institute on Retirement Security has published a report defending public pension plans and outlining the big economic benefit they bring.
The study focuses on retiree spending, and how that helps the economy. It argues that these defined benefit plans become an “automatic stabilizer” for the economy by supporting 2.5 million jobs, $358 in economic output nationwide and $57 billion in federal, state and local taxes.
According to NIRS, for every $1 in benefits paid, $2.36 of economic output is generated. And for every $1 contributed to these plans by taxpayers, there is $11.45 in economic output.
Industries that benefit most include:
– Health Care and Social Assistance: 425,000 jobs supported, $35.6 billion in economic impact.
– Retail Trade: 393,000 jobs supported
– Accommodation and Food Services: 239,000 jobs supported
– Manufacturing: $69.2 billion in economic impact
– Finance and Insurance: $32.6 billion economic impact
Pensions get outsized bang for the buck because employer contributions make up a small portion of the $3 trillion in assets these plans hold. The vast majority — almost 70% — comes from investment earnings. The current market downturn is threatening that though, atleast in the short term, according to one study that finds $1 trillion in losses in these plans in the past year alone.
Pressure on public pensions have been building for years as retirement benefits in the private sector have waned. But cutting benefits is extremely unpopular with elected officials, who rely on votes from local workers. This study gives them a defense of that support, breaking down the benefits state-by-state.
The states benefiting most are New York ($24.0 billion annually), Illinois ($12.9 billion), Texas ($12.4 billion), Pennsylvania ($10.5 billion) and Florida ($9.1 billion).
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