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Squeezed in the Public Sector

The days when government jobs -- with their lush benefits and secure futures -- were sought after are gone, as workers face pay freezes and potential retirement-plan cutbacks. HR leaders in the public sector may find it harder to recruit and retain experienced managers or executive-level talent, experts say.

Monday, May 9, 2011
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Government work ain't what it used to be.

Working in the public sector once offered a secure job with plush benefits. No longer.

These days, federal, state and municipal workers are seeing pay freezes, furloughs and layoffs. And on top of increased scrutiny over pay and benefits, more and more states are reconsidering collective-bargaining rights of state employees.

The cumulative effect may be tarnishing the prospect of government work for many would-be public-sector workers and curtailing the sector's ability to attract top talent.

"It is getting harder to get highly skilled individuals to join the public sector because of the uncertainty around wages and benefits going forward," says Ken Lewis, client relations director for Kenexa in Denver.

Lewis, who recruits doctors and engineers for the Defense Department and has worked with the City of Los Angeles and other public-sector employers, says potential recruits these days tend to have many more questions about health and retirement benefits offered by the government than they once did.

"It used to be that people felt comfortable going with the public sector because the raises and benefits were consistent; now, we're hearing rumblings from people who say they're not so sure about this anymore," he says.

"Even people we've managed to get into the pipeline are taking longer to actually sign on; they're concerned that they'll be forced to pay more for their benefits or even whether [benefits will] exist in the near future. This never used to happen, and it's increased the cycle time for recruiting folks to these positions."

Voter anger, and a growing awareness that, in many cases, rich retirement benefits promised to public-sector workers may not be sustainable, are prompting states and municipalities to re-examine these once-sacrosanct benefits.

Recently, the City of Detroit received approval from an arbitrator to reduce the pensions earned by its police sergeants and lieutenants, according to the New York Times.

In California, the majority of registered voters polled by the Los Angeles Times and the University of Southern California favored curtailing the retirement benefits available to state-government workers.

And a just-released study by the Pew Center on the States finds that state pension and retiree- healthcare funds were underfunded to the tune of $1.26 trillion at the end of fiscal year 2009. The shortfalls were driven by inadequate state contributions, an aging population and recession-related market losses.

Cuts in retirement benefits could have some unintended side effects, however.

In California, in particular, where cities and municipalities participate in CALPERS, the state-retirement system, it could have the effect of shrinking the pool of experienced managers available to governments, says Linda Kegerreis, chief workforce officer for CPS, a Sacramento, Calif.-based firm that provides HR consulting services to public entities.

Currently, mid-level and executive-level managers have moved from agency to agency and from state jobs to municipal jobs (and vice versa) without fear of sacrificing their retirement benefits.

But as some governments alter their individual funding formulas in order to cut costs, managers may be more inclined to stay put rather than risk taking a job where they would need to contribute more of their salaries toward their retirement benefit, she says.

At the same time, planned or possible cutbacks in retirement benefits for new or existing employees -- should they survive legal hurdles -- may also lead to vacancies in critical positions as experienced managers decide it's not worth their while to stick around, says Kegerreis.

Younger applicants will probably be less concerned about pension cutbacks than their older counterparts, she says, as "retirement is a minimal concern to most of them at this stage of their lives."

Those experienced managers might face an unwelcome discovery about compensation in the private sector, however.

Some public-sector employees have an inflated sense of private-sector pay, says Erin Peterson, who helps manage recruitment-process outsourcing at Chicago-based Aon Hewitt and works with a number of public-sector clients.

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"I can tell you that many of the specialists and experts we recruit for our private-sector clients are paid considerably less than many teachers for work that is equally demanding and intellectually challenging," she says.

"Private-sector pay has been squeezed by offshoring and the need for companies to stay price-competitive," she says. "It's a misperception that public-sector workers are paid less."

 

Breaking it down by experience, Kegerreis says, entry-level workers in the public sector tend to receive better pay than their private-sector counterparts, while executive-level managers and professionals, such as attorneys who work in government, typically draw smaller paychecks than their counterparts in private industry. 

For executive-level employees, the lure of government service tends to be altruistic, not financial, says Kegerreis, whose own work experience includes HR positions for cities and counties in three states.

"The appeal of public-sector jobs, particularly at the county and city level, is that you actually get to help make a difference in the community in which you live," she says. "So, at the local level, I think it's important to get back to a values-based approach for attracting recruits -- emphasizing the fact that public service can be really satisfying."

This may be harder to do at the state and federal level, she says, where the impact of individual jobs tend to be less immediately evident.

However, the federal government has hardly been a slacker in trying to make itself more attractive to candidates, says John Salamone, who spent 17 years working in public service, starting with a $9,000 part-time job in the office of former New York Sen. Alphonse D'Amato.

The Office of Personnel Management has begun requiring federal agencies to submit quarterly reports on the amount of time it takes them to hire new employees, with the goal of reducing it to 80 days "instead of six months," says Salamone, now a managing consultant at Federal Management Partners in Alexandria, Va.

But in terms of what ultimately attracts people to government jobs, he echoes Kegerreis: "If you look at the most recent Federal Employee Viewpoint Survey, 90 percent of the respondents said they feel the work they do is important. I think idealism and the sense of doing important work really drives most federal employees."

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