Aging

What Do Americans Think About the Pension Crisis?

Most realize the problems, but they don't want tax increases or spending cuts to fix them.

|

There is as much as a $4 trillion gap between what states have promised their public workers in retirement pensions and what they've actually set aside and invested in order to pay for them. There are enough reasons this has happened to count as a survey question on the most boring episode of Family Feud ever—states and cities didn't set aside enough money, employees didn't contribute enough, and guaranteed investment returns are overestimated, among many other problems.

But what does the average American think about the pension crisis and what would they do? A small number of communities like Phoenix, Arizona, and San Jose, California, have put pension reform in the voters' hands, with mixed results. In our latest Reason-Rupe poll, we decided to focus almost entirely on the pension crisis, asking Americans how seriously they view the problem and what sort of trade-offs they would accept to fix it.

Yes, Americans Are Concerned About the Pension Crisis

Pension worriers will be pleased to hear that Americans are at least paying attention. A full 72 percent of those polled are either "very" or "somewhat" concerned about state and local governments' ability to fund the pensions they've promised to public employees. A similar number (74 percent) are concerned that state or local governments will raise taxes in the future in order to meet these pension obligations. When asked to prioritize dealing with the pension crisis, 35 percent said pension reform should be a top priority, while 41 percent said pension reform should be an important but lower priority.

Actually tackling the pension crisis is a much more complicated affair. The poll asked participants to consider a host of different possibilities—raising taxes, reducing services, capping maximum pension payments, requiring workers to pay more, and transferring public employees to 401(k)-style defined contribution plans, rather than guaranteed pensions.

The most consistent response is probably also the most obvious: Americans want pension reform solutions that push public employees to play a greater role in their own retirements rather than relying on taxpayers to bail them out. Those surveyed were significantly opposed to raising taxes (74 percent) or cutting government services (77 percent) in order to fix funding problems with public employee pensions. Instead, when given a list of choices, participants strongly supported (82 percent) requiring public employees to contribute more to their own retirement funds. When asked to rank potential solutions, "Require current employees to contribute more toward their own pensions and benefits" blew every other option out of the water with 63 percent of the vote as the first choice. No other option even hit double digits.

But that list of solutions assumed states and cities would keep the existing pension systems and salvage them. The Reason-Rupe poll also asked whether participants would like to switch public employees from pension funds to 401(k)-style defined contribution retirement funds. The answer was yes. The poll asked participants whether they would favor such funds for current public employees and a separate question for just future hires. In both cases, the majority said yes, but support for shifting over future employees was notably higher (67 percent) than for current employees (59 percent).

But when comparing the two types of retirement systems in different ways, differences in responses were notable. The poll asked participants a question where the benefits of switching to a 401(k)-style plan were described ("401k style programs give employees the flexibility to take the plan with them from job to job and are less costly to the taxpayer") as well as the concerns about switching to a such a plan ("benefits would not be guar

anteed and would depend on how well the employees saved and how the market performed"). When those descriptions were used to ask whether they supported or opposed a shift to 401(k)-style programs, 66 percent still supported the shift. But when asked to consider a shift to 401(k)-style programs given only the concerns, support dropped to 50 percent. And when people polled are asked if they'd support shifting to 401(k)-style programs if it meant "breaking a contract made with public employees when they first accepted their jobs," support plummets down to 38 percent. When asked to trade off a shift to 401(k)-style programs with either raising taxes or reducing services to pay for retirement, support for 401(k) programs climbed back up (66 percent and 59 percent). Those polled even opposed increasing taxes or reducing government services in order to pay the current pension benefits for already retired employees.

The lesson here: Americans don't necessarily want to break an agreement with public employees or push them into retirement plans where the future benefits are not guaranteed, but they are willing to do so in order to avoid additional tax increases or reductions in government services.

"But what do the millennials think?" You may ask. Do they understand the crisis they're getting themselves into as they take up a larger and larger chunk of the workforce? Yes and no. Those polled under the age of 30 do have concerns, but the numbers are more muted than for older generations. The number of millennials who say they're concerned about pension funds drops down to 59 percent, and they're less likely to see dealing with pension problems as a top priority (only 25 percent). Nevertheless, millennials also supported shifting public employees to 401(k) plans and requiring employees to contribute more into their retirement plans. Variations in responses by millennials may indicate more that they have less experience in these workplace issues or with dealing with taxation impacts rather than any sort of generational differences. For example, millennials were more likely to believe (34 percent) that public employee and private employees received fundamentally the same retirement benefits, something older workers know is untrue (public employees are widely understood to generally get better retirement benefits). They were also the only age group where a majority (59 percent) believed that pension calculations for retiring employees should be increased by using unused sick time, vacation pay, and specialty pay, a system that has led to the abuse known as "pension spiking," with public employees getting six-figure annual pension guarantees. When we break down the millennial age demographic further, millennials' attitudes start to shift toward the overall average the older they are, more closely aligning with the over-30 crowd.

Public Employees Are Not in Complete Denial

The poll asked respondents whether they worked in the public or private sector (or if they were retired from the public or private sector) so their responses could be compared. Public employees accounted for 17 percent of the working respondents and 36 percent of the retired respondents. Public employees are certainly paying attention to the impacts of bankruptcy in cities like Detroit and Stockton, California. Public employees are more concerned (80 percent) about the state of pensions than private employees (67 percent). It's understandable they're concerned, since they are the most directly affected should their cities or states fail to address underfunding.

Let's look at the bigger, important differences first: Public employees don't believe their maximum pensions should be capped (only 39 percent support, compared to 63 percent among private sector employees). In addition, 56 percent want to be able to pad their pensions with bonuses and unspent vacation and sick time, while 57 percent of private sector employees say no. And they oppose shifting current public sector employees (themselves) into 401(k)-style plans by a slim margin, 52 percent against it. The prospect of having to raise taxes or reduce government services in order to fund pensions is not enough of a trade-off to convince public sector employees to support a shift to a 401(k)-style plan.

But public employees do support putting future government employees into 401(k)-style programs (54 percent), and when the benefits of a 401(k) program are included in the question, public employee support for a shift jumps up to 61 percent. When the risks are invoked, support, of course, plunges.

Public employees are just as concerned as private sector employees that taxes will have to be raised in order to pay pension obligations. When asked to consider solutions to the pension crisis, public employees actually have largely similar responses to private sector employees, though the numbers may be different. Public employees say they don't want to raise taxes (64 percent against), and they don't want to reduce spending for services (75 percent against).  But they are willing to contribute more toward their own pensions (64 percent). Their support is much lower than the private sector (where it's 88 percent), but it is notable that public employees, just like private employees, see increasing their own responsibility as the first response to fixing underfunded pensions.  And this agreement remains when respondents are asked to choose between either raising taxes and reducing services or renegotiating employee contracts to make employees contribute more. The public employees would prefer to renegotiate and pay more by a solid vote of 70 percent. Almost a third of public sector employees think one of the "major reasons" pensions are underfunded is because their own benefits are too high. The number is lower than for private sector employees (48 percent there think they're too high), but that still means one out of three public employees recognize what they're getting from the system.

Public employees also agree with private sector employees that the public should get to vote on whether to grant increases to public employees' pensions and benefits. The numbers, again, are lower for public employees (61 percent support compared to 83 percent) but still solid.

Finally, what should probably be the biggest concern to pension reformers out there were the responses to a question that asked, "If your elected representative voted in favor of shifting employees from guaranteed pensions to 401(k)-style accounts, would this make you more likely to vote for him or her, less likely, or would this not affect your vote?" Among the respondents, 27 percent said they'd be more likely, 22 percent said they'd be less likely, and a full 50 percent said it wouldn't affect their vote either way. But among public employees, 42 percent said such a shift would make them less likely to vote for the representative. So while the public may largely agree that there's a pension crisis, those who are not direct beneficiaries of the program may not see decisions about pensions especially affecting their ballot choices. This may be a concern to elected reformers in states and municipalities where organized labor representing public employees works hard to get the vote out for their interests. But then again Democratic pension reformer Gina Raimondo beat back union opposition in 2014 to win election as governor of Rhode Island. 

All this analysis is just the tip of the iceberg of the Reason-Rupe 64-question poll. Read through all the results here.

The Reason-Rupe national telephone poll, executed by Princeton Survey Research Associates International, conducted live interviews with 1003 adults on cell phones (501) and landlines (502) January 29-February 2, 2015. The poll's margin of error is +/-3.8%. Full poll results and methodology can be found here, including poll toplines (pdf) and crosstabs (xls).

NEXT: Friday Funnies: This is Brian Williams Reporting

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Yes, I did that on purpose.

    (You’ll know what this means when you get to it.)

    1. $89 an hour! Seriously I don’t know why more people haven’t tried this, I work two shifts, 2 hours in the day and 2 in the evening?And i get surly a chek of $12600 whats awesome is Im working from home so I get more time with my kids.

      http://www.navjob.com

    2. People actually read the articles?

  2. “But what do the millennials think?” You may ask.

    I do not.

    1. Nobody should, either.

      How many people aged 18-29 voted in the mid-terms? Like 13%?

      My generation’s concerns would be irrelevant, even if there were any.

      1. “What do Millennials think?” is a running joke on this website, in case you’re unaware.

        Reason ran about 20 articles on the cultural and political preferences of Millennials last year (I am not exaggerating).

        Because if one thing in life is certain it’s this: a 20-somethings cultural and political preferences will never change.

        1. According to what I read here yesterday, college students are children who need to be supervised with day-care-style rules.

          Now that we know this, why are we allowing children to vote?

          We need a new amendment raising the voting age to 26.

      2. The staff at Slate was so upset over the Republican sweep last year, that an editorial there urged Millennials to vote in midterm elections. Towards the end of the text, the piece reminded readers that there is an election every two years, not every four years.

        1. “Towards the end of the text, the piece reminded readers that there is an election every two years, not every four years.”

          tl;dr

          whatever cool story bro the kochs control our election system anyway

          1. You mean Soros.

            1. After a good string of H&R nutpunches, my Koch is pretty Soros, some days.

  3. So while the public may largely agree that there’s a pension crisis, those who are not direct beneficiaries of the program may not see decisions about pensions especially affecting their ballot choices.

    Everyone is a single-issue voter. That issue? The candidate’s hair.

    Maybe fiscal policy overall might creep into a voter’s mind when pulling the lever, but I can’t imagine too many people zeroing in on pension reform, no matter how bad it’s gotten.

  4. What percentage of the working population work directly for a government? Teachers, cops, garbage men, building inspectors, etc?

    1. What percentage of the working population work directly for a government?

      Whatever the answer is I’m sure it’s “too high”, you can bank on that.

      1. Of course it is. There is too much government. So there are obviously too many government employees.

    2. It’s extremely interesting that no clear answer to that instantly is offered here.

      As far as the pensions go, they are just another PONZI scheme.

      People are much less able to admit that, than admitting other popular government scams are ponzi schemes.

  5. I was recently hired in a position where a state pension was available. But to get this pension I had to decide within 31 days of hire whether I wanted to join the pension. The decision is irrevocable. I can never try to join it again. Well, the terms were that I would have to contribute 7% and then I would only be vested after 10 years. If I left before then I’d get the money back “plus interest” meaning plus 0.25% or whatever the savings rate is. Otherwise I would have 7.25% contributed by the employer into a 403(b). I could also contribute whatever to another retirement account. So to get the “guaranteed” benefits of a pension (which weren’t all that great) I also had to forgo this 7.25% extra money that would accrue at market rates over time. What an easy decision not to join the pension. If it was 5 years instead of 10 it would have been more difficult.

    1. You sure about that? I recall legislation that reduced (maybe even ended) 10 year cliff vesting. Might be only three years now, or even one year, to begin to vest in the employer’s contribution.

      1. So says Wiki:

        “For retirement plans in the United States, employees are fully vested in their own salary deferral contributions upon inception. For employer contributions, the employer has limited options under the Employee Retirement Income Security Act (ERISA) to delay the vesting of their contributions to the employee. For example, the employer can say that the employee must work with the company for three years or they lose any employer contributed money, which is known as cliff vesting. Or it can choose to have the 20% of the contributions vest each year over five years, known as graduated vesting.”

        1. Ah! There is no “employer contributed money” whatsoever. The plan I was offered was 7% employee contributions, zero employer contributions. You would be vested after 10 years. If you leave before then, you get your money back in one lump sum, but you get no benefits.

      2. What state? I’m talking about Maryland.

        1. Working directly for the State of MD used to be five years.

  6. If things were managed correctly the private sector would pay a premium for those with experience in the public sector.

    But, the public sector has its hooks in so many things the result is chaos, confusion, high taxes, waste, a bloated budget, and poor returns.

    I recommend a federal government that involves itself primarily in national security and the administration of law while leaving the rest to each state.

    Neither major party is sufficiently inclined that direction. But, The Fair Tax would be a good start.

    1. Here here. But there are those among us who create twisted arguments to support the claim that a consumption tax is worse than an income tax (lol).

      1. The only fair tax is one where 47% of the population have no skin in the game.

  7. Earning cash on-line was never been straight forward because it has become on be half of me currently. I freelance over the web associate degreed earn concerning seventy five green backs an hour. Get longer together with your family by doing jobs that solely need for you to possess a pc and a web access and you’ll have that at your home. slightly effort and handsome earning dream is simply a click away…..
    ??????? http://www.Workvalt.Com

  8. Retired government employee needs to take a paycut. Public pensions were established and modified through coercion. Maybe just end them and provide everyone that paid in their share of what is actually available.

    1. That sounds like a good solution.

    2. From each according to his ability, to each according to what is available.

      A hard lesson of the actual destination of Socialism.

  9. As long as abortion on demand is legal, I don’t think I would oppose this movie’s solution to the pension problem.

    1. Carousel would certainly take care of the pension problem.

    2. I remember Jenny Agutter being very hot and frequently naked in that movie. Much enjoyed by early adolescent me.

  10. Get Paid Up To $21.75 Per hour
    – No Experience Necessary
    – Beginners preferred
    – No websites needed
    – No CPA
    – No PPC
    – No One Click Wonder
    – No Fake jobs
    – JUST REAL RESULTS
    Click Here For Details…………

    ????? http://www.netpay20.com

  11. OT = Canadian Terrorists! They Hate Us For… uh, Their Freedom? or Hockey Day? or something.

    (*yes, I’m sure they have some sorta-poor people too, but I’ve been to Halifax, and its as close to a Progtopian White Person’s Utopia of Social Equity and Boredom as I could imagine; point being, its sort of hard to argue that either ‘cultural-oppression’ or ‘socio-economic woes’ drove these people to pursue their murder-suicide agenda)

    I’d similarly bet a big chunk of the ISIS-volunteers are not people who ever felt Islam was oppressed, or that they suffered from poverty or social exclusion due to Western Cultural Hegemony or anything…but rather were mostly just young people who had nothing else to do and were *bored, angry and stupid*

    Eric Hoffer has always been right about this stuff.

    That said… in this particular case, it seems these juvenile misanthropes imploded on themselves before they could get their freak on.

    Still, I have no doubt that this story will be used to claim that NSA-Surveillance ‘protects’ us… despite, as always, it providing little more than a convenient-ex-post-facto replacement for police investigation.

    1. Weird Al knew all along:

      Don’t wanna be a Canadian idiot
      Won’t figure out their temperature in Celsius
      See the map, they’re hoverin’ right over us
      Tell you the truth, it makes me kinda nervous

      Always hear the same kind of story
      Break their nose and they’ll just say “sorry”
      Tell me what kind of freaks are that polite?
      It’s gotta mean they’re all up to somethin’
      So quick, before they see it comin’
      Time for a pre-emptive strike!

      https://www.youtube.com/watch?v=C_TfBbR6L0M

      1. They are ust a bunch of flapping headed beady eyed socialists.

  12. (You’ll know what this means when you get to it.)

    Nice try, Scott. I’m still not gonna read it.

  13. hy waht is going on

  14. $89 an hour! Seriously I don’t know why more people haven’t tried this, I work two shifts, 2 hours in the day and 2 in the evening?And i get surly a chek of $12600 whats awesome is Im working from home so I get more time with my kids.

    http://www.gowork247.com

    1. And you don’t even have to speak English!
      What a deal!

  15. “Most realize the problems, but they don’t want tax increases or spending cuts to fix them.”

    Well, in that case, I guess we’d better organize the harvest team for the money orchard!

  16. The lesson here: Americans don’t necessarily want to break an agreement with public employees or push them into retirement plans where the future benefits are not guaranteed, but they are willing to do so in order to avoid additional tax increases or reductions in government services.

    Simply cut government by 75% and fire them. Problem solved.

  17. Pay employees their full pay and let them choose to who and how much of their pay goes to their medical insurance, pension fund, and long-term care fund.

    Stop letting companies, unions, cities, states and the federal government mismanage and underfund promised benefits.

    Liberate the paychecks of hard-working Americans from the convoluted tax code and dictates of politicians on how to save for retirement.

    1. Of course, pensions should be privatized, but how do we get there? Politicians use pension promises because lets them give tons of money to special interests without actually incurring any debt on the books. And voters don’t notice because their taxes still stay low. So how do you get mainstream voters to notice?

      1. Have Reason focus on Public Pensions for a month?

        I wonder what the Millennials think?

  18. my classmate’s mom makes $82 /hr on the laptop . She has been laid off for 7 months but last month her paycheck was $16174 just working on the laptop for a few hours. you can check here……………
    ????? http://www.netcash50.com

  19. my classmate’s mom makes $82 /hr on the laptop . She has been laid off for 7 months but last month her paycheck was $16174 just working on the laptop for a few hours. you can check here……………
    ????? http://www.navjob.com

  20. I WANT A PONY!

  21. Another angle to the unfunded-liability aspect is that to the extent there do exist assets to these pension programs, they often consist of bonds on the liable governmental body. In other words, the pension contributions were loaned to the government and _already spent_. A future generation has to not only supply the retired with some interest income, but also the principal (which the current generation already consumed by present-day spending). It is a cruel joke.

  22. Sounds like a plan to me dude. Ww

    http://www.BestAnon.cf

  23. If only a judge would rule that cities couldn’t restructure or write-off pensions in a bankruptcy. Hilarity would ensue.

    Watch, as the town’s citizens evaporate, leaving only the local pensioners behind.

    Be amazed, as the pensioners form a circle, and figure out how they’re going to guarantee themselves all the money they owe themselves.

    I’m crossing my fingers for that one.

  24. I’ve made $64,000 so far this year working online and I’m a full time student. I’m using an online business opportunity I heard about and I’ve made such great money. It’s really user friendly and I’m just so happy that I found out about it. Heres what I’ve been doing, http://www.wixjob.com

  25. Hey you guys I have found the perfect job as a full time student, it has changed my life around! If you are self motivated and social media savvy then this is ideal for you. The sky is the limit, you get exactly how much work you put into to it. Click on this link to get started and see for yourself……….
    ????? http://www.netpay20.com

  26. my neighbor’s sister makes $83 /hr on the computer . She has been fired for six months but last month her payment was $13320 just working on the computer for a few hours. visit http://www.jobsblaze.com

  27. my neighbor’s sister makes $83 /hr on the computer . She has been fired for six months but last month her payment was $13320 just working on the computer for a few hours. visit http://www.jobsblaze.com

  28. Wow, there’s a big surprise. If you ask people if someone else should take a pay cut, they’ll say yes; if you ask people if they themselves should pay lower taxes they’ll say yes.

    Shoot, if I got a choice to vote to eliminate my house payments and make the bank eat the loss, I’d vote for it too.

  29. Google pay 97$ per hour my last pay check was $8500 working 1o hours a week online. My younger brother friend has been averaging 12k for months now and he works about 22 hours a week. I cant believe how easy it was once I tried it out.
    This is wha- I do…… ?????? http://www.jobsblaze.com

  30. Google pay 97$ per hour my last pay check was $8500 working 1o hours a week online. My younger brother friend has been averaging 12k for months now and he works about 22 hours a week. I cant believe how easy it was once I tried it out.
    This is wha- I do…… ?????? http://www.jobsblaze.com

  31. The buckyballs effectiveness to alleviate stress is essential to its design, individual magnetic balls form your buckyballs and gives it a design unlike any other Like other stress relief tools, your buckyballs can be molded, shaped, twisted, contorted, and crushed to ease stress and soothe mood buckyballs is unique from other stress relief tools because you can demolish the buckyballs and put it back together effortlessly.

Please to post comments

Comments are closed.