WASHINGTON, D.C. - MARCH 6, 2012 - A new economic impact study finds that pension benefit expenditures provide critical economic stimulus to the economy, including more than $1 trillion in total economic output in the United States.
Pensionomics 2012: Measuring the Economic Impact of Defined Benefit Pension Expenditures, reports the national economic impacts of public and private pension plans, as well as the impact of state and local plans on a state-by-state basis.
The study calculates that pension expenditures supported some 6.5 million American jobs that paid nearly $315 billion in income to other Americans in 2009. More than $1 trillion in total economic output and $553 billion in value added in the United States was attributable to pension benefits. These expenditures also supported some $134 billion in tax revenue at the local, state, and federal levels.
In 2009, the national unemployment rate was 9.3%. The study finds that the 6.5 million American jobs supported by pension expenditures is significant, as it represents 4.2 percentage points in the national labor force in that year.
"Pensions play an important role in building a strong, vibrant middle class, both in terms of the economic security they provide to retired Americans and because of the role they play in growing our nation's economy," said Senator Tom Harkin, chairman of the Senate Health, Education, Labor and Pensions Committee. "When retirees get their monthly pension check, it doesn't just sit in their pocket. They spend it at the grocery store, the local pharmacy and the shopping mall. The money goes right back into the community, and that is the kind of economic activity that is particularly important as our economy regains its footing. In Iowa, for example, our public pension system has an enormous economic footprint, and it has been an especially important economic driver for many of our rural communities."
"I don't put my pension check in a drawer," said Ann Gardella, a Rhode Islander who retired in 1992 after 35 years of teaching. " It goes right back into the economy when I pay my taxes, daily living expenses, and occasionally splurge at a local restaurant with friends. That means financial stability in retirement for me, and it's also great for Rhode Island's economy. Along with my fellow retirees, our spending was significant to the state economy - about $1 billion in economic output and more than 8,000 jobs."
"Understanding the economic impact of pension spending is critical as our economy struggles to recover and create jobs," said Ilana Boivie, report author and NIRS economist. "The secure monthly income provided by pensions can act as an 'automatic stabilizer.' That is, retirees with a reliable pension check can continue to spend on basic needs even during tough economic times like we saw in 2009."
Boivie continued, "That isn't necessarily the case for retirees relying on 401(k)-type plans, who in 2009 had seen severe losses to their nest egg. These Americans are often forced to retreat from spending just when the economy needs stimulus," Boivie explained.
The study also finds that:
- Over $426 billion in public and private pension benefits were paid to nearly 19 million retired Americans in 2009.
- For each dollar paid out in pension benefits, $2.37 in total economic output was supported. For every dollar contributed by taxpayers to state and local pension funds, $8.72 in total output was supported nationally.
- Nationally, the largest employment impacts were seen in the food services, real estate, health care, and retail trade sectors.
The analysis was conducted using the most current data available from the U.S. Census Bureau and IMPLAN, an input-output modeling software widely used by industry and governments analysts.
The full report is available at www.nirsonline.org, along with a national map and State Fact Sheets.
For specific information on how Louisiana pension benefits positively impact the state economy, click here.
ABOUT NIRS - NIRS is a non-profit, non-partisan organization established to contribute to informed policymaking by fostering a deep understanding of the value of retirement security to employees, employers, and the economy as a whole. Located in Washington, D.C., NIRS' diverse membership includes financial services firms, employee benefit plans, trade associations, and other retirement service providers.