Building an Economy that Works for Everyone

Public Sector Job Loss and Pay Cuts Slow Economic Recovery – but Pensions Prove Strong Investment

Part 1 | Part 2 | Part 3

Policy brief: Public employee compensation

State and local government employees provide vital services to their communities as teachers, firefighters, social workers, prison officials, and nurses. They are also consumers. Cuts in public jobs and in paychecks through mandatory furloughs, pay freezes, and higher contributions for health insurance and pensions reduce purchasing power and slow economic recovery.

Federal assistance allowed state, school district, and local governments to avoid more severe losses in 2009 and 2010, but renewed federal aid is unlikely for the 2011-13 biennium. Public job losses will continue at least through 2012 as public budgets and programs continue to be slashed. These reductions will slow economic recovery.

But in spite of the weak economy, public pensions are proving to be an especially strong investment. Each dollar paid out in public pension benefits results in $2.36 in economic activity, according to the National Institute on Retirement Security. In 2006, 7.3 million retired employees of state and local governments and their family members across the U.S. received $151.7 billion in pension benefits. The spending generated led to the creation of more than 2.5 million American jobs.

In 2010, Washington’s public employee pension systems paid $2.6 billion in benefits to over 122,000 people living throughout the state.  In turn, those pension dollars supported nearly 43,000 jobs.

Read more | Fact sheet: Public employee compensation »

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