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October 04, 2011 at 09:54 AM
A new issue brief from The Center for Retirement Research at Boston College compares retirement wealth for private employees versus their state and local government counterparts. The brief finds that overall, 65-year-old couples with a state-local worker do not end up with more wealth at retirement than their private sector counterparts. However, the results differ by tenure in the state-local sector: the one-third with long tenure has 11% to 18% more wealth at age 65; the other two-thirds have less wealth at age 65.
The report surmises that for long-tenure workers, the wealth gain may be more from having a defined benefit plan, which forces saving, than from having higher compensation.
“The compensation of public employees is a hot topic in the wake of the financial crisis,” the brief reads. “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.
The brief asks whether, at the end of the day, state-local employees end up with more wealth at retirement than their private sector counterparts. That is, it looks at the wealth of couples where the head is age 65 and tests, controlling for many other factors that could affect the outcome, whether state-local employment has a positive or negative effect on wealth and how that effect is related to tenure in the state-local sector.
