The Evolution of Public Sector Pension Plans in the United States

Municipal governments in the U.S. began offering retirement plans for their workers in the mid-19th century, and state governments followed in the early 20th century. As these plans matured, they confronted economic, social, and political challenges, including the creation of the Social Security system, which subsequently shaped their structure, governance, and generosity. After reviewing this history, we employ data from all 50 states to estimate a pension benefit equation for hypothetical workers and explain differences in the generosity of plans across states and types of workers covered. We show that population growth, plan funding, union representation, and participation in Social Security influenced the generosity of the plans.