Pensions have become a thorny and contentious issue in Illinois. The state has the worst funded pension liability in the country, with only 24 percent of the money it promised retirees available, according to State Budget Solutions, a national research group. Gov. Pat Quinn, who gets much of the blame for the crisis, even tried to stop lawmakers’ paychecks until they could agree on a new pension plan.
But pensions weren’t always as negatively viewed as they are now. At one time public jobs, and the long-term stability offered by public pensions, were an essential stepping stone for blacks and, to a lesser extent, Latinos trying to move into the middle class, according to Monique Morrissey, an economist at the Economic Policy Institute, a Washington, D.C.- based think tank that focuses on economic opportunity.
In Illinois, 20 percent of public-sector workers are black, according to census data. Statewide, they make up 14.3 percent of all workers. Latinos make up 5.9 percent of state-employed workers and 16.9 percent of all workers statewide.
“These communities value financial security highly,” Morrissey said. Having much less inherited wealth compared to whites, blacks and Latinos often gravitated toward jobs in the public sector because they paid better.
A 2011 study by the University of California, Berkeley Labor Center showed that median wages for African Americans in the public sector were on average 39 percent higher than wages in health care, social services and retail, the next leading sectors that employed black workers.
Public sector jobs also offered long-term retirement stability, Morrissey said. But in the last 20 years, many private sector jobs have switched from defined-benefit pension plans to 401(k) plans that require employees to fund their own retirement accounts. For employees, 401(k)s are usually a rotten deal, said Morrissey. The switch to 401(k)s has left fewer minority workers overall participating in employer-based retirement plans. Public sector pensions, though, still make up the majority of the traditional defined-benefit pension plans.
But the political push to fill state budget holes by cutting pensions could chip away at the little that remains of retirement security in African American communities, Morrissey said.
The Illinois General Assembly has long been unable to agree on what pensions changes to put forward. But most plans currently on the table suggest changes to Cost of Living Adjustments, which allow benefits to be adjusted with the cost of living. Of all the ways to trim pensions, said Morrissey, COLA cuts are particularly troublesome as they would affect people who are already retired and may be running low on benefits.
At the end of the day, she said, it’s especially important to view the pension debate in terms of the larger loss of wealth in black and Latino communities in recent years. Along with public sector jobs, “the other secure road to the middle class was home ownership,” a path no longer available after the mortgage crash of 2008, Morrissey said.
“The public sector has been crucially important for black and Latino communities,” Morrissey explained. Many of the changes to pensions and public sector work “are going in exactly the wrong direction.”