How the impending wave of worker retirements will change government in Minnesota

MinnPost illustration by Christopher Henderson

When two Minnesota cities — one large, one small — decided earlier this month to offer paid family leave for employees with newborn children, leaders in both places predicted they would be the first among many local governments to do so. 

That’s because Brooklyn Park and St. Paul said they weren’t responding to political or union pressure, but to demographics — the need to help recruit and retain younger workers in the wake of the “Silver Tsunami.”

First coined by the Pew Center in a 2001 report, the phenomenon describes the impacts of aging baby boomers on the work force, health care and the economy. The most oft-repeated statistic from the report: that 10,000 of the oldest boomers turned 65 on a single day in 2011; and that another 10,000 will turn 65 every day through the year 2030.

That wave will hit government especially hard, with increased demand for services and the decreased amount of taxes paid by boomers. But the most pressing challenge for government falls on human-resources departments. Government workers tend to be older, on the job longer and retiring at younger ages than private-sector workers.

And there are a lot of boomers on government payrolls. The state of Minnesota, for example, counts 46 percent of its 33,500-person executive-branch work force over the age of 50, with 3,200 already past the average retirement age of 61.

According to a recent state work-force report by Minnesota Management and Budget, those numbers raise a number of concerns, including maintaining institutional knowledge, planning for transition and recruiting new talent.

And a small city will lead them

One government that not only sees the tsunami coming but is also trying to prepare is Brooklyn Park. Earlier this year, city staff began briefing the City Council on the issue, presenting a program to ease a transition that will see one in five city workers retire over the next five years.

Those numbers translate into two major challenges for the city: How does it make sure the knowledge and skills held by those retirees don’t go out the door with them, and how can it improve its odds of attracting younger workers to choose government service.

Michael Sable
Michael Sable

To deal with the first issue, Brooklyn Park is planning to formalize a mentoring program that will allow retiring and retired workers to share knowledge with younger employees; the program will also boost training programs and tuition reimbursement for younger employees.

To deal with the second — attracting millennials who will soon become the largest share of the nation’s work force — the city will institute flexible work schedules, match holiday schedules to a broader array of religions and allow telecommuting. 

But what got the most attention was when Brooklyn Park became the first city in the state (by a week) to approve paid family leave for city workers. It was a move that, though it applies to both new mothers and fathers, was clearly targeted at women. “Females are outpacing males in terms of college degrees,” said Brooklyn Park assistant city manager Michael Sable. “In looking for knowledge workers, the odds are pretty good we’ll have more women than men.” 

Erin Dady
Erin Dady

Just one week after Brooklyn Park approved two weeks of paid family leave for birth mothers, St. Paul approved a plan to offer four weeks of paid leave.

Erin Dady, St. Paul Mayor Chris Coleman’s chief of staff, said the idea came out the city’s emerging leaders academy, a training program for younger workers who want to move up the ranks in city government. After interviewing younger current and former city employees, the group reported that women wanted benefits and policies that allowed them to better balance their work and personal lives.

Dady said paid leave is a benefit that didn’t cost very much — an estimated $200,000 a year. And Coleman said he’s OK if the price tag goes up because it will indicate the city is adding exactly the kind of employees it’s seeking. Dady said the city is also looking at other changes to address younger workers’ expectations about workplace technology and flexibility. 

Minneapolis expected to follow

Minneapolis City Coordinator Spencer Cronk said he first began working on the retirement wave while in his previous job as commissioner of the state Department of Administration, where 40 percent of the 500 employees were retirement eligible.

“It’s a challenge and an opportunity,” he said. “It gives us the opportunity of saying, ‘This is a chance for us to look at how we do our work and how we recruit and hire.’”  

Cronk said he expects Minneapolis will consider paid family leave for city employees before the end of the year. One assumption that should be reconsidered, he said, is that workers want and expect to remain in a job for their entire careers. Benefits, pay and advancement should be rethought with the understanding that millennials prefer to move from job to job as opportunities arise and interests change. “If you don’t create meaningful work, people will leave,” Cronk said. 

On the state level, meanwhile, agencies have been designing new strategies and processes to address vacancies opened by boomer retirements, said John Pollard, the communications director for Minnesota Management and Budget. One issue often raised by younger workers: the long and overly bureaucratic hiring processes. In response, though the state keeps vacancies open longer to allow outreach to communities underrepresented in government, it has also tried to speed up hiring decisions. 

The state has also increased internal leadership training for both emerging and senior managers, Pollard said, but is not yet considering adding benefits to appeal to younger applicants.

Will it work?

The types of benefits offered can definitely improve the ability of employers to retain and attract employees, said Colleen Manchester, an assistant professor at the University of Minnesota’s Carlson School of Management who studies how workplace benefits create incentives for workers.

For millennials, those incentives include maintaining work-life balance with such benefits as flex time, telecommuting and parental leave, she said. And parental leave is as important to men as women.

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“Even in traditionally male-dominated fields such as police, there’s a sense they want to be more involved in their children’s lives,” Manchester said. There is a perception among younger workers, however, that government jobs lack flexibility, lack innovation and are less technologically advanced.

“They have grown up in a time of technological innovation and they see government agencies as being hard to change,” she said.

And though appealing to the public-service characteristics of government employment could be beneficial when it comes to recruiting workers, government has some catching up to do as it prepares to compete with the private sector for millennials. “Private companies are constantly thinking about work-force planning and succession planning, including knowledge transfer,” Manchester said.

A recent survey of government human-resources executives did find one means of attracting younger workers that goes against the stereotype of job-hopping millennials. The International Public Management Association for Human Resources found the kind of pensions that come with government jobs offer “a distinguishing positive benefit” in the battle with private-sector employers.

Immigrants also key

While the drive to attract younger workers get most of the attention, the Minnesota State Demographic Center identified another source for the state’s future work force: newcomers. In fact, without immigrants, Minnesota’s population will begin to shrink by 2043, the center said in its most recent population report. 

And though millennials are entering their peak child-bearing years, said Minnesota State Demographer Susan Brower, they aren’t expected to procreate at the rates of their grandparents or baby boomer parents.

“Because we can’t rely on natural increases, we’ll have to rely on immigrants — both domestic and international,” Brower said. 

By moving more quickly on expanding benefits that might attract younger workers, both Brooklyn Park and St. Paul may have accomplished the goal of standing out in the hiring market. That advantage dissolves, however, when other governments follow suit. “That’s the fundamental flaw in the plan,” Sable joked. “We’ll adapt.”

Neil Reichenberg, executive director of the International Public Management Association for Human Resources, said he isn’t surprised that state and local governments haven’t taken more steps toward preparing for the demographic wave about to hit them. The Great Recession not only delayed the impact of retirements but put governments in crisis mode; when you’re worried about laying off workers, you don’t spend a lot of time thinking about the long-term future.

But the pace of retirements has picked up as some older workers have gained more confidence that their retirement plans will be sufficient. And some government workers have moved up retirement plans to get ahead of reductions in pension benefits that were another response to the recession. 

That’s why Reichenberg and his organization have been trying to raise the alarm. “The numbers are not going to change,” he said. “You can delay retirement but no one has found a way to delay aging.” 

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Comments (12)

  1. Submitted by craig furguson on 10/30/2014 - 10:44 am.

    I’m not sure that there will be a wave of retirements

    But many will age in place because of incentives built into the pension. Prior to July of 1989, the major MN Govt Pensions had the “rule of 90,” which allowed for full retirement when your age and years of service = 90.

    But for workers hired after that, full retirement is at full social security age. I was hired in 1987 and my rule of 90 date is July 1, 2019 (go ahead, calculate my age : ) But many of my co-workers will not have that luxury. I may stay working to support my kids health insurance until age 26, or because my wife cannot retire at that age. I’ll fit right in with the rest of the aging staff.

    Besides, I’m at the top of my salary range and why would I leave unless I really disliked my job or had something else I really want to do?

    Regardless, my prediction is that the government work force will continue to age unless something different is done with the pensions, such as matching 401’s that are portable.

    • Submitted by Frank Phelan on 10/30/2014 - 02:51 pm.

      Here’s One Reason

      To consider retiring:

      At a certain point, you’re only working for a few bucks an hour. The numbers vary for everyone, but if you’re annual wage is $85K, and your pensions, etc, would be worth $65K, you’re only working for $10/hour.

      Of course other factors come into play, but its not so easy to head out before sunrise on a January morning when you’re pocketing minimum wage pay. Having a second cup of coffee, then leaving later for a few hours of volunteer work may be more fulfilling to some.

      • Submitted by craig furguson on 10/30/2014 - 05:43 pm.

        I’ve been doing the math

        My annual wage is about $90k and the pension calculation at full retirement is 1.7%/year x 33 years x$ 90k = $50 ish k. If I take a the benefit to pay out for both my wife and I for our lifetime it is a little less. My wife will not have any sort of a pension until full social security age (she’ll have a partial govt at that point and she’s got no medical. I have single coverage retiree medical at the same rate as a normal govt employee, until I hit medical age. We have 401’s besides pensions, but I’m guessing to maintain our lifestyle (and health insurance) I’ll have to stick it out until I’m closer to social security age. I could live on less money, but the medical insurance costs botches it.

  2. Submitted by Gerald Abrahamson on 10/30/2014 - 11:31 am.

    Retirement age =66+ now, will be 67 soon.

    Here is the official Social Security page documenting age 67 as the full retirement age for anyone born in 1960 and later.

    http://www.socialsecurity.gov/retire2/agereduction.htm#sb=2

    At the bottom of that page, it says people should still apply for Medicare within 3 months of their 65th birthday in order to minimize their ongoing premiums.

  3. Submitted by Nathan Fuerst on 10/30/2014 - 12:28 pm.

    A Millenial’s Opinion

    As a 21 Y/O senior at the U of M, I will be graduating this spring and likely be working for the government.

    I have to say, this article highlights my concerns very well. To me, government jobs are characterized by decent (but standard) benefits and little outward mobility. Many of my peers will be going into private sectors with jobs that offer flashy benefits such as vacation/travel time, high salaries, and professional development opportunities like continuing education.

    Receiving benefits comparable to what those in the private sectors are receiving would go a long way towards helping me justify my career choice in public service. Not that I would change my decision to go into public service, but I do like that there are efforts to reward that choice.

    • Submitted by John Appelen on 11/01/2014 - 07:05 pm.

      T2

      The compensation received is comparable.

      The private sector employees receive more compensation since they have less job security. They have to perform very well every year until retirement, or they will become unemployed.

      The public sector employees receive lower compensation since they have a structured compensation plan and high job security. On the other hand, seniority equals protection in the Public employee world.

  4. Submitted by Pat McGee on 10/30/2014 - 01:14 pm.

    Lip Service

    Perhaps I’m just jaded by having worked for government for a number of years. I hear all the flag waving and bands being played by HR departments and nothing of substance happening. It takes more than 4 weeks of leave (a one or two time event on average) to positively alter a work environment. Modern technology would be appreciated by us oldsters too. We get tired of having to use our personal smart phones to look up work related information because our work mandated browser is too old and the websites don’t work on our work computers. We too, have dreamed up upward mobility and seen cronyism and favortism. Chairs and desks that aren’t broken would be nice too. Theoretically the government I work for supports flexibile hours and working from home. In reality it is hard to find. Even the technology department bans it for its staff.

    Yes, government needs to do something. It needs to do many things. Will it? It needs creative management and money. Two things that are in short supply. Good luck.

    • Submitted by Todd Hintz on 10/30/2014 - 03:51 pm.

      IT

      Money I can’t fix, but get me in there and give me even a modest budget to work with and I’ll do miracles. With a few standard business practices you can have a robust system that requires minimal maintenance from the IT department, maximum up time for the users, and speedy and efficient equipment.

      IT doesn’t need to be hard, complex, or expensive. But you do need to reinvest in it periodically to get the maximum benefits from it.

      • Submitted by craig furguson on 10/30/2014 - 05:45 pm.

        The state is still running 1985 mainframes in DPS and the DMV

        And we saw the implementation of MNsure. Good luck with the efficiency effort.

        • Submitted by Todd Hintz on 10/30/2014 - 07:05 pm.

          Coins

          On the other side of the coin, I haven’t seen a lot of efficiency on the private side either. I watched one project switch over from Unix to Windows servers. They went from a few efficient servers that could run for years without a reboot to many servers that needed to reboot weekly. They wasted more money than the entire budget of many government programs.

  5. Submitted by Ray Schoch on 10/30/2014 - 05:09 pm.

    Age-related

    “The International Public Management Association for Human Resources found the kind of pensions that come with government jobs offer ‘a distinguishing positive benefit’ in the battle with private-sector employers.”

    It might well be the *only* positive benefit, but that one benefit could end up trumping some others.

    The $85K that Frank Phelan mentions is more than twice the highest salary I ever earned while teaching in Missouri, and I can only dream about a retirement benefit of $65K. My income has never reached the median level for the metro area in which I lived, wherever that happened to be, and that continues to be the case in retirement. That said, however, my retirement benefit *has* reached a point where, with adjustments for inflation, it allows me a reasonably secure, modest level of comfort as I slide into my dotage because it’s a defined *benefit* plan rather than the pernicious 401K-based defined *contribution* plan with which corporate boards have saddled millions of employees.

    Right-wing legislators in Missouri have tried to destroy the system by converting it to something 401K-based, or by diverting the contribution money into the state’s general fund in order to avoid tax increases for state services, but those scams have, so far, been beaten back. I tend to regard a modest level of comfort in retirement as an equally-modest revenge for being underpaid throughout my career.

    In the meantime, and as usual, the society has largely ignored the warnings that numbers and public policy geeks have been telling us about for at least a decade, and only now, with the “silver tsunami” on our figurative doorstep, are we beginning to pay attention. This would all have been much easier to address if we’d started a decade ago, but “woulda, shoulda, coulda” doesn’t solve current problems, so we should start now.

  6. Submitted by Pavel Yankovic on 10/31/2014 - 08:06 am.

    And then…

    there are those of us in the private sector without the security of a pension and benefits for life (on the taxpayers tab) who will be able to retire when our personal assets reach a certain amount. I still wouldn’t trade it.

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