The State Worker

Study: Pension cuts impair government quality

The quality of government pensions corresponds to the quality of workers that agencies hire and retain, according to a new study that cautions state and local officials to be careful when cutting benefits lest they impair recruiting and retaining top-notch help.

Researchers for the Center for Retirement Research at Boston College started with the premise that better-quality workers tend to earn higher salaries. Using federal data, they found that private-sector employees entering the state- and local-government sectors earned 7 percent less than those leaving it. In simple terms, the numbers show state and local agencies have trouble keeping employees that command high wages, a phenomenon called the “quality gap.”

The gap for governments with the most generous pension plans is narrower, researchers found, indicating that pension terms can make a significant difference when the best employees consider taking or keeping a government job.

The study concludes that “states and localities with relatively generous pensions should be cautious” when whittling pension benefits for new hires because “reducing pension generosity may widen the gap.”