News & Information

CCH® HR MANAGEMENT - 05/22/09

Economic slump pushing public sector employees to delay retirement

The slumping economy is holding back retirements among state and local government employees, according to a new survey of government managers, sponsored by the Center for State and Local Government Excellence. Almost half (49 percent) of the respondents to the membership survey said 20 percent or more of their workers are eligible to retire in the next five years. And an overwhelming majority (80 percent) said the economy is affecting the timing of retirements.

Of those, 85 percent said employees are delaying retirements, while only 9 percent said they are accelerating their retirements to avoid changes that will reduce benefits, and 7 percent said employees are taking incentives for early retirement.

"There is a silver lining to the delayed retirements," said Elizabeth Kellar, executive director of the Center for State and Local Government Excellence. "Governments have a lot of older workers who work in specialized fields and are hard to replace. Retaining these individuals a little longer gives us more time to help new employees prepare to fill their shoes."

A majority of respondents (56 percent) said their governments do not have a formal plan to develop their workforce, while 39 percent said they did. Of those with a plan, just 31 percent had made changes in their plans, while 54 percent said they had not made changes.

"While the current economic crisis is resulting in delayed retirements, the demographics have not changed," said Neil E. Reichenberg, executive director of IPMA-HR. "When the economy recovers, there will be a spike in the number of retirements as the large number of baby boomers leave. Human resource departments need to lead workforce planning efforts, so that the public sector will be well positioned when the economy recovers."

Among those managers who are seeing retirement delays, a majority (62 percent) said they have more time for knowledge transfer; 51 percent have more time for position transition; and 49 percent have more time to mentor younger workers. On the downside, 38 percent said they are not able to make changes as quickly as they would like; 36 percent said they are unable to hire new staff with skills they need; and 21 percent said they may have to introduce incentives to encourage early retirement.

"The delayed retirements are certainly good news in the short term as governments can benefit from these experienced workers," said Leslie Scott, director of NASPE. "However, when the economy rebounds and the retirement-eligible employees do retire, combined with the layoffs that governments are implementing, this could cause a tremendous strain on their ability to deliver services. In a number of cases, seniority is the sole determining factor in the layoffs, without regard to an employee's specific skill sets and the future needs of government."

Three in five respondents (60 percent) said their state governments are instituting layoffs, with 39 of those saying layoffs are based solely on seniority. By contrast, about 42 percent said their local governments are laying off employees, with 43 percent of the layoffs based solely on seniority.

Visit our News Library to read more news stories.