Retirement Benefits Play Large Role in Boosting Economy

“This study measures the magnitude of the ‘multiplier effect’ of state and local pensions in the U.S. economy,” said Ilana Boivie, NIRS policy analyst and report co-author, in a press release. “The multiplier effect occurs because one retiree’s spending becomes another person’s income.”

Boivie explained that as retirees spend their benefits, businesses see an increase in their income, which then enables businesses to spend and create jobs. “Each successive round of spending ripples through the economy to generate an economic impact that is much larger than the initial spending by the retiree,” she said, according to the announcement.

The new report, “Pensionomics: Measuring the Economic Impact of State and Local Pension Plans,” finds that expenditures made from state & local pension benefits for fiscal year 2005-2006:

• Supported more than 2.5 million American jobs that paid more than $92 billion in total compensation to American workers;
• Supported more than $57 billion in annual federal, state, local tax revenue;
• Paid $151.7 billion in pension benefits to 7.3 million retirees and beneficiaries;
• Had large multiplier effects. Each taxpayer dollar invested in state and local pensions supported $11.45 in total economic activity, while each dollar paid out in benefits supported $2.36 in economic activity; and
• Had the largest impact on the manufacturing, health care, finance, retail trade, and accommodation and food service sectors.

The analysis was conducted using data from the U.S. Census Bureau and IMPLAN, an input-output modeling software widely used by industry and governments analysts.

The full report is available at www.nirsonline.org , along with a national map and state fact sheets.