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Comparing Wealth in Retirement: State-Local versus Private Sector Workers

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Abstract:

The compensation of public employees is a hot topic in the wake of the financial crisis. Funded levels of public pension plans declined sharply at the same time that state and local revenues collapsed. As a
result, plan sponsors in most states are looking for ways to reduce pension costs. The assumption – either explicit or implied – is that pensions are too generous. Pensions, of course, are just one part of
compensation, so any comparison must also consider wages and other benefits. The question of comparability of compensation in the state-local and private sectors was the focus of a recent Issue in Brief.1 The
conclusion was that wages for workers with similar characteristics, education, and experience were higher in the private sector than the public, but benefits for state-local workers roughly offset the wage penalty.
Taken as a whole, compensation in the two sectors is roughly comparable.

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