Government Workers Underreport Retirement Plan Availability in the Current Population Survey

Push will come to shove when whoever is elected in the 2012 election is forced to tackle our federal fiscal problems. The tax deferral provided to the employer-sponsored retirement system will get intense scrutiny as part of this process. Thus, it is critical that decision makers have the best possible information as they apportion the pain among federal programs, whether they are supported with direct expenditures or indirectly with tax incentives.

One standard for determining the availability to workers of an employer sponsored retirement plan has been the Current Population Survey (CPS). The CPS is a monthly survey of about 60,000 households conducted by the United States Census Bureau for the Bureau of Labor Statistics (BLS). The BLS uses the data to provide a monthly report on the Employment Situation. The survey asks about theemployment status of each member of the household 15 years of age or older in the calendar week containing the 19th day of the month. Based on responses to a series of questions on work and job search activities, each person 16 years and older in a sample household is classified as employed, unemployed, or not in the labor force. The survey also includes a retirement question that is the basis for determining the availability of retirement plan coverage to American workers.

The argument that only half of the private sector workforce works for an employer that offers a retirement plan springs from the annual March supplement of the Current Population Survey.

Unfortunately, the wording of the retirement-related question is “Other than Social Security, did [any] employer or union that (name/you) worked for in [the past year] have a pension or other type of retirement plan for any (emphasis added) of its employees?” We all know that the federal government and just about every state and local government entity have retirement programs for their employees. However, in response to the 2011 questionnaire 22% of those indicating they work for the federal government and 21.5% of those indicating they work for a state or local government responded “no” to the question—a shockingly wrong response.  When a question elicits such an enormous number of obviously wrong answers the question is flawed and the results are suspect.

Furthermore, if a substantial portion of relatively well-educated government workers do not know that their government employer offers a retirement plan to any of its workers, how can we expect the private sector workforce to be more accurate in their response to the question? Fifty-two percent of those categorized as private sector workers responded to the CPS retirement question saying that their employer did not offer a retirement plan to any of its workers, even though virtually every private employer with 100 or more employees offers some type of retirement plan.

We’ve known that the CPS under reports coverage, but even we were surprised that the error is so large.  Add 20 points to the private sector findings, and you get a coverage figure that resembles non-survey results, such as a study of tax records by the Social Security Administration or the Bureau of Labor Statistics’ National Compensation Survey of employers.

Our glass is definitely more than half full.  Our job is not finished, but we are in much better shape than our opponent’s claim.