Do Public Pensions Help Recruit and Retain High-Quality Workers?

Many state and local governments have responded to shortfalls facing their pension plans by cutting benefits. These benefit cuts – which typically affect only new employees – take many forms, ranging from increases in age and tenure requirements for benefits to reductions in cost-of-living adjustments (COLAs). These benefit reductions will reduce a component of public employment compensation that helps ensure comparability of total compensation between the private and public sectors. Furthermore, more generous pensions may help employers recruit and retain high-quality workers who have the foresight to value the faroff benefit that pensions represent. Thus, it is natural to wonder if reductions in public pension benefits will hinder states’ and localities’ ability to recruit and retain workers in competition with the private sector. This brief sheds light on this question.