UC study says hybrid pensions would hurt lowest-paid workers

Sacramento Bee, February 3, 2012

By Jon Ortiz

Gov. Jerry Brown's plan to put future state and local government employees into hybrid pension plans and push back the full retirement age for new hires would hit low-paid workers the hardest, according to a recent academic analysis.

Researcher Nari Rhee of the pro-labor UC Berkeley Center for Labor Research and Education concludes that while Brown's suggested package of changes to public retirement systems contains "several sensible proposals," the pension design and age threshold changes "may impose a disproportionately large burden on low-wage workers."

Her reasoning:

Low-wage workers are ill-equipped to bear the risks and increased costs of a 401(k) style plan, need to replace a greater portion of earnings than do middle- or high-wage workers in order to meet basic expenses in retirement, and begin their working careers much earlier, and experience shorter life expectancy, than professional workers. Because of these factors, the two proposals could have significantly greater impacts on workers at the bottom of the wage spectrum.

The paper, available via this link, was published a month before Brown sent detailed pension reform language to the Legislature on Thursday.

Original Article