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Show Me the Benefits!

Some states are betting on traditional employment incentives, including retirement accounts and pay raises, to lure younger workers to public sector jobs.

By Zaakary Barnes, Landon Jacquinot and Suzanne Hultin  |  August 28, 2023

In the post-COVID economy, competition for a shrinking workforce has led to innovations in public sector employment policy. Once-experimental concepts, including pay transparency and competency-based hiring, are now common.

Still, to build tomorrow’s public workforce, many states are relying on proven strategies, including better pay and benefits.

The Seesaw of Jobs Numbers

Over the last two decades, the labor force participation rate has shrunk. Before the pandemic, the main drivers of the decline tended to be generational, with a greater number of aging workers and fewer incoming younger workers. COVID-19 amplified existing pressures and introduced new ones. Early retirements, lack of child care and workplace safety concerns all contributed to an initial exodus of workers. Burnout and a desire for better work-life balance led to further resignations and job changes.

Related: This story first appeared in the Summer 2023 print edition of NCSL’s State Legislatures magazine.

All told, the pandemic pushed unemployment to a record 14.8% in 2020. But after persevering through this social and economic disaster, the nation effectively seesawed to the other end of the employment spectrum: a record low unemployment rate of 3.4% in January, with job postings outpacing the recovery of the labor force.

The public sector has been hit especially hard. According to the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, the total number of state and local government job openings in the months leading up to the pan-demic had just topped 693,000. By April 2020, that number fell by more than 22% to 535,000. Since then, the number of job openings has continued to rise—and rise and rise.

Postings in state and local governments alone reached 946,000 by July 2022 and have remained high, with 959,000 job openings as recently as May.

Cost of a Reduced Workforce

Deep staffing shortages can complicate the delivery of key government ser-vices and, in some cases, threaten public health and safety. States and localities are in the midst of a prolonged crisis in po-lice recruiting; severe employment gaps compromise the ability of state and local agencies to protect safe drinking water; and the pandemic threw into sharp relief the “neglect, panic, repeat” dynamic that has been in play in the public health workforce for years.

In Oregon, nearly 1 in 5 jobs in state agencies is currently vacant (though the number fluctuates). Understaffing can make jobs in corrections and public health more dangerous, leading to staggering human services caseloads and triggering still more resignations, as remaining employees shoulder more and more work when their colleagues resign or retire.

Even unrepaired potholes and delays in processing zoning permits or issuing driver’s licenses can degrade the quality of life and erode public confidence. And problems with state and local government service delivery spill over into the broader U.S. economy. After all, public sector employees maintain the roads and operate the buses and trains that carry many Americans to work. A shortage of bus and rail operators can yield reductions in transit services, which in turn can affect the daily commute for all sorts of workers.

The State Response

As states struggle to address workforce shortages in the public sector, executive and legislative branches are exploring strategies to recruit and retain qualified workers. One common challenge the public sector faces: keeping salaries on pace with those in the private sector. In response, some states and localities have been providing salary and pay increases for public sector positions. Last year, Florida increased its public sector minimum wage to $15 an hour and provided a 5.38% general raise for all state employees.

Kentucky’s 2022-24 budget included an 8% across-the-board raise for all state employees. New Mexico passed a minimum $10,000 pay raise for teachers and a 7% in-crease for education staff.

“We’re trying to claw our way back into a good education system by doing programs that we know are needed,” New Mexico Sen. Mimi Stewart said in an NCSL town hall. The state now has higher starting teacher wages than any of its neighbors.

“We don’t want to lose our best and brightest based on criteria which are not current.”

—Georgia Sen. John Albers

Other states have followed suit with pay designed to encourage workers to stay in their jobs, stem the exodus from public sector work and compete with the private sector as well as neighboring state workforces. In addition to raising wages, states have enacted laws aimed at increasing pay transparency. A handful of states now mandate that salary ranges be listed in job postings or revealed during the hiring process. Four states this year—California, New York, Rhode Island and Washington—have created pay transparency laws, joining Colorado, Connecticut, Maryland and Nevada. Supporters of the laws say they lead to more pay equity and could help bring more talent to the public sector.

States are also using skills-based, or competency-based, hiring to help with recruitment and retention. Skills-based hiring removes unnecessary employment barriers, such as requiring a college degree, and focuses instead on relevant skills and experience. This is most common in the technology sector, where many companies deem college degrees a plus but not a requirement. As of June, at least 10 states had removed bachelor’s degree requirements for many of their public positions, with legislation pending in other states, including Georgia.

“We don’t want to lose our best and brightest based on criteria which are not current,” says Georgia Sen. John Albers, who sponsored the bill.

Building a strong public sector workforce pipeline is another strategy states have pursued, many through fellowship and apprenticeship programs.

California and Missouri, for example, have programs with local colleges that encourage graduate students to work in state legislatures as science experts. Other states have expanded apprenticeship programs into the public sector. In 2021, Tennessee established a registered apprenticeship program for teachers that aims to create better pathways into the profession and stem the recruitment and retention struggles most states are facing.

Beyond Pay and Pipelines

Expanding worker benefits, such as paid leave and retirement plans, is another way to boost the appeal of public sector employment. At the height of the pandemic, most workers in both the private and public sectors were granted paid sick leave to care for themselves or a family member. Although the federal provisions making those leaves possible have expired, surveys show most Americans, and more important, most workers, support access to paid leave, whether to tend to an illness or to welcome a new child.

Sixteen states and Washington, D.C., require paid family and medical leave for all employees. Connecticut was the first to enact paid sick leave, and although there was a slow uptick in participating states, the pandemic helped to accelerate the trend.

Since 2020, three states—Georgia, New Hampshire and South Carolina—have begun offering paid parental leave for state employees. Georgia and South Carolina allow paid leave for the birth, adoption or fostering of a child. New Hampshire covers those circumstances as well as certain family medical concerns and qualifying military exigency leave. Although these states are few in number, they may provide solid models for other states aiming to recruit and retain employees, especially among a growing generation of workers who increasingly value a work-life balance.

Another benefit strategy states have at their disposal is refining pension and retirement plans. To address a nearly 20% vacancy rate for state jobs, Alaska lawmakers this year introduced bipartisan legislation to establish a defined benefit pension plan for new state employees (and allow current workers to choose the new plan or the existing defined contribution arrangement). The proposal, which is unlikely to pass this session but may be revived next year, incorporates cost- and risk-sharing provisions for employers and employees.

Critics argue that defined benefits do not reflect the realities of a dynamic modern workforce: They are not portable and much of their accrual is delayed until workers are approaching retirement. Advocates counter that reopening the defined benefit plans in Alaska could help with workforce retention goals while reducing volatility and the cost of honoring existing obligations in the state’s legacy plans.

A Win for the Public Sector

To address worker shortages, policymakers are pursuing both short- and long-term measures to draw candidates into state and local jobs. Although a return to pre-pandemic labor force participation seems unlikely, legislation aimed at recruiting a new generation of public employees remains popular.

Talk of a recession lacks the urgency it had earlier in the year, and the pace of layoffs in the tech sector has slowed; still, states are better equipped than ever to offer one thing the private sector can’t: job stability.

Perhaps that, combined with the retention and recruitment strategies states have undertaken, will be the answer to persistent shortages.

Zaakary Barnes, Landon Jacquinot and Suzanne Hultin are part of NCSL’s Employment, Labor and Retirement Program.

Portable Benefits for Gig Workers

The rise of the gig worker has states rethinking retirement savings, health care, paid leave and other traditional worker benefits.

The more than 57 million independent contractors currently working in the United States often are ineligible to receive the benefits enjoyed by those working for a traditional employer, according to the data analysis company Statista. As the gig workforce grows, states are looking at ways to make benefits “portable”—tied to the worker, rather than a single business.

A couple of states have tested the waters in this policy area. Washington state allows transportation network company drivers, including those working for Uber and Lyft, to earn sick leave and receive worker’s compensation insurance coverage while keeping their independent contractor status. Colorado allows all independent contractors to opt in to the state’s paid family leave system.

a framework for comprehensive portable benefits. Enacted this year, the bill requires that contributions to the portable benefit plan are voluntary, that portable benefit plans do not change worker classification, and that public and private sector employers are allowed to begin offering portable benefits in the state.

When the plans get off the ground, the hope is that the state and private entities can recruit and retain qualified contractors as a part of their workforces. 

“Gig economy platforms like Uber, Instacart and DoorDash are all vocal about being willing to offer these benefits—if they could,” says Utah Sen. John D. Johnson, who sponsored the legislation. “The bill is set to offer opportunities for the estimated 80,000 gig workers operating in the state.”

In 2022, NCSL convened a working group of legislators and staff to discuss portable benefits for contractors. The work resulted in a framework for state policymaking.

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