In an economy characterized by a volatile stock market and elevated inflation, a sure thing looks better than ever. For some Americans in the labor force right now, that looks like a pension.
Striking members of the United Automobile Workers union made waves this year when the union’s leaders demanded the reopening of defined-benefit pension plans for workers hired after late 2007. Although U.A.W. leadership failed to persuade automakers to reopen the plans, the bold move didn’t go unnoticed by retirement benefit experts.
“It was interesting that U.A.W. did mention that in their negotiations, because that isn’t really something you would have seen 10 years ago,” said Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute, a nonprofit organization.
Only about one in 10 Americans working in the private sector today participates in a defined-benefit pension plan, while roughly half contribute to 401(k)-type, defined-contribution plans, which are funded with their pretax dollars and, in many cases, employer contributions.
Experts say the shortcomings of defined-contribution plans, with their assets invested by employees themselves, are more apparent in the current economic climate.
“Many American workers are seeing that it’s a lot harder to have those accounts work,” said Josh Cohen, head of client solutions for PGIM DC Solutions, a division of Prudential Financial. “That’s heightened with market volatility, inflation and increased longevity.”
The competitive labor market has prompted more job hunters to seek out employers that offer richer benefits. The jobs platform Indeed found that over the past three years, people looking for work have increased searches for pensions by roughly 12 percent.
There are indications that companies are increasingly responding. Indeed also found that, while the number of job postings that mention pensions remains low, that figure has shot up roughly 130 percent over the past three years.
Even before the pandemic and its economic upheaval, there was evidence that employees — including young Americans who entered the work force after 401(k)s became dominant — placed a high value on defined-benefit pensions. A report published in 2020 by the National Institute on Retirement Security found that more than four out of five millennials working in the public sector cited pensions as a key reason for staying in their jobs.
The jobs platform Glassdoor found that employers with pensions had an edge over rivals in employee satisfaction, which can improve recruitment and retention. Employers offering pensions have earned consistently higher ratings on the site over the past decade. Benefit ratings for jobs with pensions averaged 4.37 out of a possible 5, compared with 4.21 for jobs without pension benefits.
“I would characterize that as a pretty large and persistent advantage,” said Daniel Zhao, lead economist at Glassdoor.
For Jessica Steinbach, the chance to take a job with a pension right out of college was a “crazy-amazing opportunity.”
Although Ms. Steinbach, 27, earned a college degree in the performing arts, she works as an assistant naturalist for the parks department of Dutchess County in the Hudson River Valley of New York, where she runs educational programs for children and adults.
Ms. Steinbach said her parents had helped her see the long-term benefit of participating in a pension plan starting from a young age.