Illinois pension debate overlooks role of public-sector jobs in sustaining the middle class

Illinois pension debate overlooks role of public-sector jobs in sustaining the middle class
Photo by 401(K) 2013/flickr

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.”

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  • Wow, hard investigative work went into this.

    Sorry, the money is all gone, spent by the very elected government officials whom you worship and vote into office time and again. Don't you get it: they stole the money form the public pension funds? Don't you care. Why is government always the answer to every problem that you "muck" up?

    A better name for your column might be "Great Government Reporter".

    Again, the money is gone. It can't be taxed again from people who do not have it, and the fault lies with the political hacks you and most of the media sleep with in every issue.

  • The inherent problem with public sector jobs is that, except for users of the Tollway, consumers are not willing to pay the full cost for those services. Thus, the only way to support your downtrodden is through compelled taxation.

    Maybe some of the services, such as mental health and education, are necessary public services that should be paid by taxpayers. However, with the state's budget mess, mental health services have been thrown into the toilet.

    Other than that, your justification for the public sector jobs is the same as that of say, the teachers' union--it is whether the teachers get their benefits, not whether the children are learning anything. Which may be a reason your Blacks and Latinos rely on the public sector, either as being employed or on public assistance. In the case of the Stroger administration, there wasn't any difference.

    But the obvious point is that it would be more economically efficient if the people were employed in sectors where the consumers would be willing to pay for the services. But, so long as the state runs its economy with the effect of forcing business out of the state or making it uneconomical to do business here (despite your argument that food stores aren't going to move, what's your answer for the about 5600 Dominick's employees--get on the state payroll?), Richard is correct, the money is running out and Detroit is coming.

    In the meantime, to maintain your franchise, you, in effect have to argue that 49 years of Title VII has meant nothing.

    And why should private sector employees who are limited to 401(k)s, or had their pension plans cashed out into IRAs support the drones who claim a constitutional right continually to pick the taxpayers pockets?

    But as the Muckrakers previously replied here, you didn't take economics in college.

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    Most Americans are honest and work, two jobs if they need to, and pay taxes. The tax dollars belong to the people. When the economy is so bad that people can't find work or get unsecured loan for low credit, are the rest of us supposed to sit around and watch people starve and become homeless? Not if you have compassion for people and not if you understand economics.

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