Contract uncertainty prods public employees to retire early

Work/retirement crossroads sign.

Kai Ryssdal: Economists like to say that incentives matter. Make something lucrative or painful enough, and people are going to change their behavior.

That truism is playing out for a lot of public employees, as their retirement benefits are put at risk in state budget negotiations.

From WUWM in Milwaukee, Erin Toner explains.


Erin Toner: For the past two decades, 57-year-old Janet Badura worked with thousands of families as an employee of Milwaukee County. She helped parents of severely disabled children find support services, like respite care and summer camp.

Janet Badura: Well, I always thought public service was a noble profession, and I still do. I think there's something very satisfying with working for the public good. A person with a disability myself, I have received services in the past, growing up, and so I always felt that I needed to give back.

But earlier this month, Badura signed her retirement papers, even though she planned to continue working for at least another year. She's getting out now because state lawmakers here have approved a bill stripping public employee unions of most of their bargaining rights.

Badura worried that without collective bargaining, her agreed-upon retirement benefits could change if existing contracts were re-written. Several of Badura's colleagues have reluctantly made the same decision.

Badura: I think it was really scary because our pensions aren't that great. And no one wanted to retire.

Badura and her co-workers are among more than 200 Milwaukee County employees who retired between January and March -- a 65 percent increase over the same period a year ago.

Gerry Schroeder is head of the county's retirement system.

Gerry Schroeder: Janitors to entry-level clerical positions to management level. It transcends worker classification.

Along with those local government workers, nearly 5,000 state of Wisconsin employees also applied for retirement in the first quarter. It's a choice civil servants around the country are facing as more states consider scaling back public employee benefits. In Oregon and New Jersey, public employee retirements were up about 50 percent.

Tim Sheehy is president of the Metropolitan Milwaukee Association of Commerce. He says the early retirements, along with changes to public employee health and retirement benefits, will help Wisconsin's bottom line.

Tim Sheehy: There's no question that the state has a tremendous fiscal imbalance. It's got a $3.6 billion deficit. It's a deficit we've carried since I can remember, and so this is an opportunity to kind of right the ship.

Many in the ranks of the newly retired are teachers. Sixty-year-old Claudia Caves teaches English at Kettle Moraine High School in southeast Wisconsin. She's leaving the classroom for good this summer, three years earlier than planned.

Claudia Caves: I have a master's degree plus 36 credits and I'm a National Board-certified teacher, and I'm taking all that experience right out the door with me.

The rush among some public employees to enter their Golden Years early could be a mixed blessing. Governments save a lot of money when their more senior and highest-paid employees leave. But those workers take with them a wealth of knowledge and experience.

Brooks Holtom is a professor of management at Georgetown University.

Brooks Holtom: If you believe that people continually improve their skills over time, losing your most experienced workers could be very difficult for an organization.

But it appears some local governments are having it both ways: cutting costs and keeping experience. In Wisconsin, some new retirees who've started collecting their pensions have been hired back into their old government jobs -- as contract workers without benefits.

In Milwaukee, I'm Erin Toner for Marketplace.

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