Pensions: Strengthening Our Workplaces, Communities and the Middle Class

Job loyalty. It seems like a concept that is slipping quietly into the night.

Over the past several decades, we have seen a number of alarming private-sector workplace trends that have diminished the relationship between employer and employee. The rise of contractors and temp employees, outsourcing, and diminished benefits have all led to an "every man for himself" attitude in today's workforce.

But perhaps the biggest contributor to job loyalty's demise is the death of the private-sector pension. It's a lesson that should give policymakers pause in the heated debate over public pension benefits.

Over the past two decades, the proportion of private-sector workers in America covered by traditional defined benefit pensions, which provide a fixed amount for the duration of a retiree's life, has dropped by roughly half -- 35 percent to 18 percent. Workers with a company pension have every incentive to grow their skills within the company, seek opportunities internally, and dedicate a lifetime of service to their organization.

Robbing workers of a pension diminishes their sense of commitment. That leads to a number of problems -- turnover, breaks in service to customers, and diminished productivity.

By 2008, the public sector had become the last place a significant proportion of workers earned a traditional pension. But when the Great Recession struck, pension investment earnings dropped, and it became clear that politicians had spent years underfunding many state and municipal pension systems.

This financial malfeasance has given pension opponents ammunition to go after public sector pensions. That may not seem like a problem for the average Joe, but eliminating public sector pensions isn't just a workplace squabble between employee and employer. Eliminating public pensions has consequences for every citizen.

A new report released this month by the Center for Retirement Research at Boston College sheds some light on these consequences. The study found that workers who left public service in cities with poor pension plans made more money in the private sector than their replacements made in their old jobs. In these cases, worker quality - measured by private-sector wage, in this study -- decreased as a result of pension cuts. Meanwhile, cities that have better pensions have a smaller "gap" in the quality of the workers leaving public service.

Public employees work for all of us. They teach our children. They clean our streets. If you have a car accident, it's a public employee who arrives at the scene. If your house catches fire, you call a public employee to put it out. More than half of non-federal public jobs are in public safety and education. These are jobs that naturally lend themselves to career longevity. Imagine the disaster that would ensue if a local fire department all of a sudden had to replace seasoned firefighters with temp workers. What would your kid's school look like if a principal replaced all your teachers with private contractors?

Real-world examples bear out the findings of the Boston College report. San Diego made drastic changes to its pension system in 2012, and lost 162 police officers over the course of the 2014 fiscal year. A lot of experience walked out the door. Today, half of the patrol officers have been with the San Diego Police department six years or less. Brian Marvel, president of the San Diego Police Officers Association, estimates that it takes five years for a police officer to become competent at the job.

San Jose also lost more than 400 police officers in recent years after the controversial Measure B gutted employee benefits. The courts later ruled Measure B unconstitutional, but sadly for the people of San Jose, the damage is already done.

It's not just public safety that suffers. There are also unforeseen consequences on your tax bill.

Public sector jobs require a tremendous amount of upfront training at taxpayer cost. In San Diego, for example, the police force spends $191,000 for each first year recruit, including a 6-month training camp. Pensions are a form of deferred compensation that help retain these recruits and justify the initial expense.

Further, benefits that reward long tenure help convince workers to take state jobs that generally pay 11% less than similar private sector jobs. Taking away pension plans would force state and municipalities to raise wages just to remain competitive.

The negative consequences resulting from the end of private-sector pensions would be far worse in the public sector. It's not just a matter of retirement security for public workers - it's a matter of security for all of us.

States and municipalities would do well to remember that when considering their budget priorities.

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