Highlights

This report analyzes the impact of public sector employment and defined-benefit pensions—which provide secure monthly retirement income based on salary and years of service—on poverty and wealth outcomes by race, gender, and educational attainment in California. Based on data from the U.S. Census Bureau, this report complements the author’s national-level study, Closing the Gap: The Role of Public Pensions in Reducing Retirement Inequality, available at https://www.nirsonline.org/reports/closingthegap/. We find that public pensions play an outsized role in the retirement security of every major demographic group in California, with the strongest impact on women and people of color. It is also a powerful tool for reducing wealth inequality. As private pension coverage declines, public pensions remain a critical bulwark of middle-class retirement security alongside Social Security, particularly for marginalized communities who have been historically shut out of other wealth-building opportunities.

Detailed findings are as follows:

1. Public sector employment plays a critical role in the retirement security of all racial groups in California, with particularly large effects on Black and Latino workers.

• Rates of public sector employment were highest for Black women (24%), white women (22%), Black men (20%), and Latina women (18%) in 2018-2021, compared to the overall rate of 15% among California wage and salary employees age 21-64.
• Public sector jobs in California provide a significantly higher rate of retirement benefit coverage than private sector jobs (74% vs. 44%), and 70% of public employees in the state are covered by a traditional defined-benefit pension.
• Latino workers in the public sector were 117% more likely to be included in a workplace retirement plan than those employed in the private sector (68% vs. 31%).
• Black public employees were 76% more likely to participate in a workplace retirement plan than Black private sector employees (72% vs. 41%). Public sector employment is a critical source of wealth-building opportunities for the Black community, accounting for 22% of Black employment and 33% of Black retirement plan participants in 2018-2021.

2. Pensions continue to be a critical source of retirement income for many California seniors, reducing retiree poverty and near-poverty across race, gender, and educational attainment. Pensions’ anti-poverty effect is the largest for Black retirees, Latino retirees, and retirees without a four-year college degree.

• Pensions are the second most important source of income for California seniors, after Social Security. In 2018-2021, 28% of individuals age 65 and older received pension income from a union, private employer, or government plan. Black seniors were most likely to have pension income (40%), followed by white seniors (33%).
• Pensions reduce economic hardship among retirees, defined for this analysis as persons age 65 and older who have at least $5,000 in Social Security income or pension income and less than $5,000 in earnings annually. In 2016-2021, 91% of retirees in households with pension income lived above 200% of the Federal Poverty Level (FPL), compared to 57% of those without pension income. (A commonly-used threshold for meeting basic needs, 200% FPL in 2021 was $25,992 for older singles and $32,758 for older couples.)
• Black retirees with household pension income were 108% more likely to be above 200% FPL than those without pension income (85% vs. 41%). Latino retirees were 62% more likely to be above this basic income threshold if they had pension income (82% vs. 51%).
• Retired men and women were respectively 55% and 60% more likely to be above 200% FPL if they had household pension income.
• Retirees with some college education or an associate degree (but not a bachelor’s degree) were 53% more likely to be above 200% FPL if they had household pension income. Those with no college education were 70% more likely to be above 200% FPL if they had pension income compared to those without.

3. Pension payments to adults age 55 and older in California represent $569 billion in household wealth, boosting middle-class family net worth and narrowing race-, gender-, and class-based wealth gaps.

• In 2018-2021, 2.1 million Californians age 55 and older received pension income totaling $47.2 billion annually. Nearly 1.1 million received income from public pensions, which provided $28.4 billion, or 60% of total pension income. More than 1 million received private pension income.
• The value of this income stream over the remainder of recipients’ lives is equivalent to $568.9 billion in household wealth from pensions, including $361.3 billion from public pensions.
• Pension wealth boosted the typical (median) net worth of older California families by 21%, with the largest impact on Black families and families headed by women and older adults without a bachelor’s degree.
  • Older Black family median net worth increased 56% from pensions, with public pensions contributing more than half of this impact.
  • Pensions increased older Latino family median wealth by 18%—a significant amount, though less than the average for all older families. However, older Latino families’ collective net worth increased by 10%, compared to 7% for all older families.
  • Median net worth increased 23% among female-headed families—with public pensions contributing almost two-thirds of the difference—compared to 18% among male-headed families.
  • Pensions increased the median net worth of families headed by people without a four-year college degree by more than 35%, and a majority of this growth came from public pensions.

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