Public Service Workers Face Retirement, Financial Security Concerns

Public sector employers are concerned their employees are not prepared for retirement, financial security of these workers has decreased, new MissionSquare Research Institute data shows.

The report, Examining the Financial Wellbeing of the U.S. Public Service Workforce, finds both public sector employers and employees are concerned about the retirement security of the state and local workforce: 41% of public sector human resources professionals say their employees are financially prepared for retirement and 81% of public employees worry about having enough money to last through their retirement.

“It’s always going to be difficult for public employers to compete on salary, so they have to take full advantage of their strong benefit offerings to build financial security for the public service workforce,” stated Lynne Ford, CEO and president of MissionSquare Retirement, in a press release.

The 2023 MissionSquare research found retirement and financial insecurity have increased for public service workers, from 2017 through 2019:

• 14% of all households employed in the public sector indicated that they could not pay all their bills, as did 11.3% of those employed in public education.
• Nearly one third of public employee households would have trouble coming up with $400 in an emergency; and
• close to one-fifth of all public employees and close to one-in-six employees in public education reported skipping health care because they could not afford it.

The onset of the COVID-19 pandemic in 2019, likely worsened retirement security for many public service workers, according to a separate 2022 MissionSquare Research Institute survey, as 52% of public sector workers were prepared to leave their jobs, either voluntarily—to change jobs, retire, or leave the workforce—because of burnout and compensation issues, exacerbated over the course of the pandemic.

Public employees often have access to strong employer-provided retirement benefits—defined benefit pensions and defined contribution plans—according to the report.

“The bottom line is that economic security gaps exist, but the public sector already has several tools at its disposal—most importantly, efficient, widespread benefits—to help meet employees’ needs,” advises the 2023 report. “State and local governments can build on those tools, for instance, by providing more short-term liquid savings vehicles, additional benefits such as more access to telework, or other non-traditional or optional benefits tailored to meet each employees’ interests and circumstances”

Employers also may want to explore additional benefits, including emergency savings accounts.

“Emergency savings were less common among single women, Black, and Hispanic public employees,” states the press release.

Several additional studies have shown a connection between workers’ access to emergency savings accounts and likelihood to contribute to a defined contribution retirement plan.

For low- and moderate-income workers, access to emergency savings accounts is also likely to bolster retirement contributions, explained Natalie Blain, a senior innovation manager at Commonwealth, at the Plan Progress webinar in August 2022.

“Emergency savings [are] really a great option to help address in the moment what’s happening … and also open up opportunity for longer-term growth,” Blain said in the webinar.

Another tactic employers can use to improve the financial wellbeing of their workforces is helping employees with existing or proposed student loan forgiveness programs because almost 33% of public employees have outstanding student loan balances, the report concludes.

Data for the MissionSquare Institute Financial Wellbeing of the U.S. Public Service Workforce report was sourced from the Federal Reserve Board Survey of Household Economics and Decision-making and the Survey of Consumer Finances.

The report was prepared by Christian E. Weller, professor and chair, department of public policy and public affairs, McCormack Graduate School at the University of Massachusetts Boston, and researcher Beth Almeida, along with input from MissionSquare Research Institute.