As many small towns and rural communities across America face shrinking populations and growing economic challenges, a new report released by the National Institute on Retirement Security finds that a positive economic contributor to these communities is the flow of benefit dollars from public pension plans.
In 2018, public pension benefit dollars represented between one and three percent of GDP on average in the 2,922 counties in the 43 states studied.
These findings are detailed in a new study released July 11 by the National Institute titled Retirement Security, Fortifying Main Street: The Economic Benefit of Public Pension Dollars in Small Towns and Rural America.
NIRS said the research illustrates the impact of benefit dollars from public pension plans according to several different measures: as a percentage of GDP by county; as a percentage of total personal income by county; and by categorizing counties as metropolitan, small town (micropolitan), or rural.
“National economic trends coupled with population declines have had a devasting impact on many small towns and rural areas across America. Often, the largest employer in these smaller towns is a public entity like a school system or municipality that employs teachers, nurses, firefighters, and public safety officials. These public employees spend their career serving their communities at a time when a growing number of young workers are leaving their hometowns for job opportunities in urban areas,” said Dan Doonan, NIRS executive director.
The study builds on previous research, adding significantly more states and examining data in 43 states from a majority of public pension plans in the states, officials said.
The newly-expanded report finds that public pension benefit dollars account for significant amounts of total personal income in counties across the 43 states studied. For all 2,922 counties in this study, pension benefit dollars represent an average of 1.25 percent of total personal income, while some counties experience more than six percent of total personal income derived from pension dollars.
The analysis indicates that less populated counties with smaller economies experience a greater relative economic benefit from the flow of public pension benefit dollars into the county as compared to more populated, urban counties. This larger relative impact helps to sustain the economies of small towns during this period of economic transition in rural America.
“Eventually, public employees in rural and smaller communities retire and typically stay in their hometown. Retired public employees spend their pension income in their towns on goods and services like housing, food, medicine and clothing, which serves as a stable source of economic activity in smaller communities. Our analysis clearly indicates that pension spending provides a substantial economic impact on struggling small towns and rural communities across the nation,” Doonan said.
The report’s key findings are as follows:
• Public pension benefit dollars represent between one and three percent of GDP on average in the 2,922 counties studied.
• Rural counties have the highest percentages of their populations receiving public pension benefits.
• Small town counties experience a greater relative impact in terms of both GDP and total personal income from pension benefit dollars than rural or metropolitan counties.
• Rural counties see more of an impact in terms of personal income than metropolitan counties, while metropolitan counties and rural counties see an equivalent impact in terms of GDP.
• Counties that contain state capitals are outliers from other metropolitan counties, likely because there is a greater density of public employees in these counties, most of whom remain in these counties in retirement.
• On average, rural counties have lost population while small town counties and metropolitan counties have gained population in the period between 2000 and 2018, but the connection between population change and the relative impact of public pension benefit dollars is weak.
The National Institute on Retirement Security is a nonprofit, 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 membership includes financial services firms, employee benefit plans, trade associations, and other retirement service providers.
More information is available at www.nirsonline.org.