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December, 1988, Vol. 111, No. 12

The comparative value of pensions
in the public and private sectors

Lora Mills Lovejoy

Do public pensions provide more benefits than do private pensions? The Bureau of Labor Statistics' first survey of benefits available to State and local government employees reveals that public pension plans tend to provide more liberal benefits, but are more likely to require employee contributions than are their private sector counterparts.

To compare employer-financed private pension plans with public sector plans, one must consider a variety of factors, including the type of formula used to compute benefits, age and service requirements for benefit eligibility, the extent to which employees help finance their pensions, and the incidence of postretirement annuity increases.  Also important is the presence of other types of retirement plans financed entirely or partially by employers.  For example, Social Security, a plan financed jointly by employers and employees, is nearly universal in the private sector and is quite common in State and local governments.  In contrast, savings and thrift, stock ownership, and profit sharing plans commonly supplement pension plans in the private sector, but savings and thrift plans are uncommon in the public sector, and stock ownership and profit-sharing plans are not relevant to government entities.

This article discusses key features of pension plans in private industry and in State and local governments and contrasts the proportion of preretirement earnings replaced by plans in the two sectors.  Data are from the Bureau's Employee Benefits Survey—the 1986 survey of medium and large firms in private industry and the 1987 survey of State and local govenments.¹ In this article, private sector employees are considered as a group; however, public sector employees are divided into three categories:   teachers, police and firefighters, and "regular" employees (that is, all employees except teachers and police and firefighters).

This excerpt is from an article published in the December 1988 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.

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Footnote

1 These surveys, and their scope, are described in William Wiatrowski, "Comparing employee benefits in the public and private sectors," this issue, pp. 3-8.

Related BLS programs

Employee Benefits Survey

National Compensation Survey

Related Monthly Labor Review articles

On the disparity between private and public pensions.—Apr. 1994.