Public Pension Funds Key to Addressing Savings Disparities Among Black Retirees

As the COVID-19 crisis ravages state public pensions across the country, the disparities in retirement savings among American’s of different races has been pulled into sharper focus. In 2016, the typical Black household had only 46% of the wealth of a typical white household, with Hispanics having 49% of the typical wealth of a white household. The economic destruction brought on by COVID-19 will likely only exacerbate these disparities.

Slavery and Jim Crow-era policies served as barriers for Black Americans to accumulate wealth, and the long-term effects of those institutions live on today. Social security, one of the great levelers in terms of retirement savings, is facing chronic shortfalls and further steps to eliminate this disparity—such as providing baby bonds to all Americans—have made little headway. One area where Black Americans and other people of color could see the greatest gains, however, is in the bolstering of public pensions.

Shrinking public pensions are hurting Black Americans more than any other group. 21.2% of Black women and 15.4% of Black men work in the public sector, compared to 17.5 and 11.8 percent of white women and men, respectively. At the same time, the gap between wages for Black and white Americans is significantly smaller in the public sector than the private sector: Black people make 90% of the income of their white counterparts in government jobs, but only 78% of their income in private jobs. Most importantly, the public pensions provided by public sector jobs have proven to be some of the most influential in raising retirement savings for Black Americans. Black retirees with public pensions face a poverty rate 20 percent below the rate of Black retirees without a public pension. Black Americans overall benefit from public pensions more than any other racial group in the U.S.

This recognition of the benefit public pensions can have, especially for racial minorities in the U.S., is crucial especially as our nation grapples with a reckoning over police brutality and other forms of racial inequality. Pension funds need to be secured, well funded, and properly managed to support the well-being of Black Americans’ retirements. As public pension liabilities continue to grow at an astounding rate in the current COVID-19 economic downturn, elected officials should recognize the importance of stabilizing public pensions—not only because retirees deserve the savings from the fund they have invested in, but also because of the potential public pensions have for ameliorating racial inequalities in our current system.