Old Assumptions, New Realities
The Truth About Wages and Retirement Benefits For Government Employees
For decades the popular image of government employment has involved the tradeoff of lower wages for job security and relatively generous retirement benefits. That image, while still widespread, is no longer the reality.
Wages and fringe benefits in the public sector now exceed those in the private sector for many comparable job titles. And retirement benefits are more expensive than ever and still growing rapidly.
Between fiscal year 2000 and 2004, for instance, the City’s contributions to employee pension funds more than tripled from $615 million to $2.3 billion. In fiscal year 2005 the City contributed $3.2 billion to the pension funds and paid about $927 million for health insurance for retirees. The City’s payments for health insurance both for workers and for retirees have been growing at double-digit rates.
The new realities are:
- In most cases, public-sector workers have higher wages than their private-sector counterparts. Generous retirement benefits are no longer required to attract municipal workers.
- New York City’s retirement benefits are far more generous than those of private employers and of other state and local governments. This is true of both pensions and health insurance benefits.
- Continuing outdated practices is highly expensive. Some of the enormous resources allocated to outdated retirement benefits would be better spent on other priorities such as enhancing public services or bringing taxes more in line with those of the cities with which New York competes for jobs and residents.
These realities are described more fully in this report, which summarizes a more detailed study prepared by the Citizens Budget Commission, “The Case for Redesigning Retirement Benefits for New York’s Public Employees.”