In a new paper, EPI economist Monique Morrissey argues that traditional pensions serve teachers and schools well, by providing long-term financial security that attracts dedicated, career-minded workers.
Morrissey critiques studies that argue that most teachers are shortchanged by pensions, because they change schools or leave the profession. In fact, these claims mischaracterize the experiences of teachers by giving equal weight to career teachers and those who leave after a year or two, rather than examining a cross section of the teaching workforce.
Research that properly weights teachers and correctly portrays their experiences shows that the vast majority are better off with traditional pensions than account-style plans like 401(k)s. Young teachers who leave the profession in the first few years may not accrue substantial benefits, Morrissey writes, but young workers in general do not accrue much in retirement savings, no matter what their profession. Meanwhile, at least half of teachers accumulate 30 years of service in their retirement plan, and at least three-fourths accumulate 20 years or more. These teachers earn a healthy return on contributions and a level of retirement security few participants in account-style plans can count on.
“The myth that most teachers get a raw deal from pensions is part of an agenda to de-professionalize teaching and attack teachers’ unions by suggesting that unions do not represent the interests of most of their members,” said Morrissey. “Pensions are ideal for the public sector, and switching to account-style plans would actually hurt young teachers in the long run, because most eventually become veteran teachers.”
Morrissey argues that replacing teacher pensions with account-style plans such as 401(k)-style defined contribution plans and cash balance plans would not only increase retirement insecurity but would also increase teacher turnover to the detriment of students. While the existing pension system can and should be tweaked to meet today’s needs, it successfully serves the goals of attracting and retaining teachers, promoting orderly retirement, and providing retired teachers with secure lifetime incomes.