Pensions’ big impact

Study shows annual benefits supported 7.5 million U.S. jobs in 2016

By Betsy Butler, Ohio Public Employees Retirement System

Jan. 24, 2019 – Think of all the things a steady, secure retirement income from a defined benefit pension affords. A place to live. Utilities. Food. Transportation. Insurance. Clothing. Contributions to nonprofit organizations. Get-togethers with family and friends. Maybe a vacation or two. The list goes on.

A reliable pension not only supports self-sufficiency in retirement after a lifetime of work. It also creates a ripple effect of direct, indirect and induced economic impacts on the federal, state and local economies.

Since 2009, the National Institute on Retirement Security has quantified the economic impact of pension payments in the United States and in each of the 50 states and the District of Columbia. By estimating the employment, output, value added and tax impacts of pension benefit expenditures at the national and state levels, the analyses continually show how important expenditures made with retiree pension benefits are to the national, state and local economies.

Pensionomics 2018: Measuring the Economic Impact of Defined Benefit Pension Expenditures, the fifth iteration of the analysis released earlier this month, found that economic gains attributable to both public and private pensions continue to be substantial. Nationwide, retiree spending of pension benefits in 2016 generated $1.2 trillion in total economic output, supporting some 7.5 million jobs across the United States. Pension spending also contributed $202.6 billion to federal, state and local government funds through taxes paid on retirees’ pension benefits and their spending.

In 2016, $578 billion in pension benefits were paid to 26.9 million retired Americans, including $294.7 billion paid to 10.7 million retired employees of state and local government and their beneficiaries (typically surviving spouses).

Expenditures made out of those payments collectively supported 7.5 million American jobs that paid nearly $386.7 billion, $1.2 trillion in total economic output nationwide, $685 billion in gross domestic product, and $202.6 billion in federal, state, and local tax revenue. The largest employment impacts occurred in the real estate, food services, health care and retail trade sectors.

Defined benefit pension expenditures have large multiplier effects. Each dollar paid out in pension benefits supported $2.13 in total economic output nationally. Moreover, each taxpayer dollar contributed to state and local pensions supported $8.48 in total output nationally.

State-level study results found that 469,649 residents of Ohio received $15 billion in pension benefits from state and local pension plans in 2016. Expenditures from those benefits supported 144,658 jobs in the state that paid $6.3 billion in wages and salaries. Ohio’s pensions also supported $20.7 billion in total economic impact and $3.7 billion in federal, state and local tax revenues.

Each dollar paid out in pension benefits in Ohio furthered $1.38 in total economic activity in the state. Each dollar contributed by Ohio taxpayers to these plans boosted $6.12 in total economic activity in the state. More details of Ohio-specific findings are available here.

OPERS paid $5.6 billion in pension benefits to more than 208,000 retirees and their beneficiaries in 2016. Because approximately 90 percent of OPERS retirees remain in Ohio, more than $5 billion of those pension payments supported the state and local economies. In 2017, OPERS paid $5.8 billion in pension benefits, with almost $5.3 billion remaining in Ohio.

Betsy Butler

Betsy Butler is the Ohio Public Employees Retirement System’s knowledge and issues strategist, researching information on pensions, retirement and health care. Betsy came to OPERS in 2009 after working as a special collections librarian for two OPERS employers: the Ohio History Connection and Miami University.

Betsy Butler

Knowledge & Issues Strategist

4 thoughts on “Pensions’ big impact

  • January 24, 2019 at 12:08 pm
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    I feel discriminated against be cause I worked hard in both state service and the private sector. If this cutting my SS is fair why isn’t anyone who earned any type of retirment in the private sector getting full SS and full retirement? I get my SS cut because I have state retirment. I paid my money into SS and I am being unfairly punished. Kentucky state employees get full SS and full state retirement, this is very unfair and discriminatory to me. I live in Kentucky and I see all these people getting all their state and SS benefits while I struggle. I started working in grade 5 and paid into SS only to be robbed now.
    What is the difference between State and private retirement….none they are both retirement funds.

    Reply
    • February 7, 2019 at 8:16 am
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      Same thing has happened to me. I only get a portion of my SS benefit because I have a public employee pension. I did not pay into SS at a reduced rate and feel I should get the entire SS payment I would be entitled to if I didn’t get a public employee pension. This is very unfair and should have never have been implemented. Just another example of the Federal government helping themselves to monies to which they are not entitled

      Reply
  • January 25, 2019 at 10:57 am
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    Great job OPERS board and staff. Please keep up the good work and the good fight. For the most part, other than children, we are the most vulnerable in this country. Without our pensions we would be in really bad shape. You are our stewards.

    Reply
  • January 28, 2019 at 1:21 pm
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    I am the spouse of a long term retired employee and I am very thankful for the pension benefit I receive from OPERS. Losing the health insurance benefit was difficult but I’m grateful for the time I was insured under the OPERS health benefit plan.

    Reply

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