Introduction

There have been recent emerging trends for employee benefits, pensions, and retirement packages for government employees.  By examining some of these trends, and comparing California with the rest of the country, some interesting insights can be gained.

Part 1- Discuss Compensation, Retirement and Benefits Trends

There are various variables that tend to affect compensation, retirement and benefit trends in the public sector. Compensation tends to quantify the organizational behavior given that it is viewed as a concrete indicator of value as well as aligning employees and the organization. Benefits in the public sector on the other hand are viewed as being lavish and out of line given the cost that they bring to the tax payers money. Retirement on its part is compensated through a pension that represents a delayed payment to civil servants at the expense of receiving lower pay.

There are several trends associated with compensation, retirement and benefits. Among them there are moving away from defined benefits to defined contributions like qualified savings plans, freezing and reducing pay, and changes in the health care benefit area.

Moving away from defined benefits to defined contributions. This means reducing these benefits once offered to employees or requiring the employees to provide higher contributions.   This is especially true for traditional benefit categories of pensions and health care benefits. A good example is how the public sector had been relying on defined benefit pension for employees like the ones in the U.S postal service. There has been a shift to defined contribution pension plans such as the 401 (k) accounts; something that has made it possible to reduce the losses that were being incurred initially. This is because the risk shifts to the employee as the organization receives more protection.

Freezing and reducing pay. For example, the comparable pay averages demonstrate that federal government workers averaged about $85,000 in pay compared to private sector workers in comparable jobs who make around $58,000.   In these last few years, there were salary freezes in many cases, and in other cases wages were slashed for some government jobs.   This was also when the governments at all levels began to shift from the defined-benefit pension plans to defined-contribution pension plans.  This was obviously a move to deal with the sudden drop in government revenue because of the dramatic decrease in tax collections and other fees.

Changes in the health care benefit area. Public employers began to change their plan designs, premiums, surcharges and co-pays because of the soaring costs. The way in which employers address rising costs is by contributing more to their employees’ health insurance, arranging plans with higher deductibles and co-pays, implementing wellness plans and workshops to keep employees healthy.

Part 2- Difference in Benefits Trends in CA vs USA

There are some differences in benefit trends between California and many states in the United States.  For instance, in 2005, it was obvious that the State of California was not ready to make this change from defined benefit pension plans to defined contribution plans when then-Governor Schwarzenegger attempted this reform.  Unlike other states, California is an employee-friendly state that provides many state employees with defined-benefit retirement plans.   In addition, California offers better health care coverage than most other states.

California has also been on the leading edge of offering higher compensation to government employees.   Since 2012, the compensation averages for California government employees at the state level and city level have increased when adjusted for inflation.   These defined benefit pension plans have been continued for both county and state workers.   California’s government employees have seen the positive increases in compensation, health care benefits, and pension plans since 2012.

In contrast, some trends in many other states have gone against these developments witnessed in government in California.   For instance, many of the poorer states had to slash their pensions, their government salaries, and downsize their workforces.   Most of these states also switched to employees contributing to their pension plans and health care packages.   These trends are unavoidable when the states’ revenues are declining significantly.   Although some recovery has occurred since 2012, when the Great Recession ended, these other states have not recovered at the same rate as California.

Part 3- Examples

The State of California has continued to pay their government employees substantially higher wages and provide benefit packages much more attractive than most states in the country.   California is an employee-friendly state by providing their employees with ample sick leave and family leave compared to other states.   California has also continued to provide pension plans that are set for a lifetime for state employees.   The health care benefits in California are also evident in how they focus on the government providing for most of the costs.   In contrast, in some of the states in the South and Midwest, these trends are visible at all.  Instead, the governments are slashing jobs, compensation, and benefits.

An example is the State of Michigan because of the significant loss of population and industries.   Government employees were expected to take wage decreases, begin to contribute to their benefit arrangements, and layoffs are common in many agencies.  Because medical costs in California makes up the majority of labor costs, employers have also been creative regarding plans and what to make available to employees. Additionally, in California, worker’s compensation claims have risen. This is due to the types of policies and laws in this area but it could also be because after the recession, organizations once again started hiring more people.

Conclusion

Compensation, benefits and retirement trends have been items of debate for some time now. The trends have been shifting to ensure to ensure protection of organizations at the expense of employees. However, the State of California has been an exception as an employee-friendly state.   It has continued to provide benefits, high pay, and great pension plans compared to most states in the rest of the country.

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