Are public sector pensions unfair?

[pcfitz80]

I know this thread may come as a surprise from someone who was posting against conservatism but I am a reasonable pragmatic liberal and can see this question from both sides:

On the one hand, hardly anyone in the private sector gets traditional pension benefits anymore. I know there is 401Ks and all but they are not the same because you have to put a lot of your own money in. In other words you have to do the planning for your own retirement and if you don’t your on your own. So why should government workers be any different? The pensions for them were only instituted for them because everyone else had them and they had to stay competitive with the private sector to attract good people. I’m sure unions played a big role too but again, those demands were not unreasonable in the days when everyone else was benefiting from “welfare capitalism”. But now the rest of us have to pay for our own retirement so why should we help pay for the retirement of others with our tax dollars?

On the other hand, it could be argued that those in the private sector are getting screwed and the solution should not be to level down. Instead of eliminating public sector pensions its private sector pensions that should have never disappeared and should be brought back. But is this realistic?

I’m surprised so few people in there 20s / 30s think about these issues because frankly we are talking about a lot of money or the lack there of. For example, many public sector workers get 60-70 percent of their final pay for the rest of their lives with cost of living adjustments also added. For someone making 70-90 K near the end of their career this is about 50K / year for the rest of their lives. And if they live just 20 more years after retiring in their late 50s / early 60s that’s 1 million dollars!

 

[Liesje]

I think about it quite a bit being that many of my family members have or will get pensions. My uncles are LEOs and my grandpa was a plumber for the city, for example. My grandpa receives more now than he ever did while he was working (pension adjusted for inflation). My LEO uncles are both "retired" but still receive hefty pensions AND are free to work other jobs (which they do, pretty much full time). They all had to do extremely exhausting, thankless jobs for little pay or NO pay if there was a strike, and they lived blue collar lifestyles, but are sitting pretty right now!

 

[maycocksean]

Interesting question! I hope it engenders some discussion.

Until the summer of '09, my wife and I lived in the Northern Marianas Islands, and the local govt. is literally being sunk by the massive obligations of their pension system. You work for 20 years and then you can retire and start collecting your pension. There are people in their earlier forties who are "retired" (and are of course working another job) and collecting government checks every month for life.

I understand the appeal of "free money" like that but realistically it's totally unsustainable. At the same time nobody seems to have the political will do anything about it.

I don't think these kinds of bloated pensions systems are good idea in the long run for anyone.

 

[pcfitz80]

Interesting question! I hope it engenders some discussion.

Until the summer of '09, my wife and I lived in the Northern Marianas Islands, and the local govt. is literally being sunk by the massive obligations of their pension system. You work for 20 years and then you can retire and start collecting your pension. There are people in their earlier forties who are "retired" (and are of course working another job) and collecting government checks every month for life.

I understand the appeal of "free money" like that but realistically it's totally unsustainable. At the same time nobody seems to have the political will do anything about it.

I don't think these kinds of bloated pensions systems are good idea in the long run for anyone.

Interesting. I think the thing w/ political will is this: 1) You have a lot of people who don't care too much about this one issue of where that one part of their taxes are going (to pension recipients). Sure, people care about taxes and don't like paying them but this one aspect gets lost amongst issues that way bigger in peoples minds (like healthcare). 2) On the other hand the recipients care a lot about keeping this perk. So in terms of who gets the money its a lot of people who care a little (but not enough to do anything) vs. a few people who care a lot. No suprise who wins.

 

[purpleoscar]

One way (my favorite way) is to have wage freezes, or increasing pension contributions to something more similar in other areas of the market to something more sustainable until there is a balanced budget with some surplus. Once the surplus is available what should happen is that it should be mostly put into overall debt (like you would pay down a mortgage) to reduce interest payments. Once the debt is paid down for some years you can lower taxes (because you have much less interest obligations) and only grow the government at the speed the market is growing (assuming good monetary policies are implemented). That way government can be in balance with the market that pays for it and you don't have to fire tons of workers who will go on employment insurance.

The other way is to do nothing and less a debt crisis occur (like in Greece) and then implement MASSIVE cuts (because you have no choice). That means even if there are strikes the political will to fix the fiscal problem stays strong.

The reason why governments get so bloated is because during big booms the economy is inflated with enormous debt and companies record huge profits and pay big taxes. The government gets lots of money and has lots of programs to pay for and the biggest expense in all government or private sector activities is wages and pensions. Politicians don't have to fight very hard during these times to prevent workers from demanding what they want (since it isn't technically their money and politicians love buying votes) so the government costs grow very big. This becomes very noticable when there is a recession and companies have to shed jobs and companies record losses. Government can only collect taxes from profitable companies so they in turn need their benefits trimmed as well but that is very unpopular for obvious reasons.

Any politicians that directly fight the unions to curtail benefits always have a tough job ahead of them.

 

[anitram]

Regardless of whether you think that public sector pensions are fair, these pension funds are HUGE players in the marketplace. They are relatively flexible and have the ability to make significant deals. A good example is the Ontario Teacher Pension Plan, which actually led the largest leveraged buy-out in history.

 

[purpleoscar]

Yeah and I'm sure big bonuses for undeserving CEOs ripping off the shareholder are big players as well. This has nothing to do with the argument. What matters is who owns the benefits and how they're earned.

 

[bigjohn2441]

no - every paycheck money comes out for the pensions of retirees from my agency, so i better goddamn well get mine in 23 years.

 

[purpleoscar]

no - every paycheck money comes out for the pensions of retirees from my agency, so i better goddamn well get mine in 23 years.

If there's ability to pay then the pension exists in it's full form. The "ability to pay" being the crucial term.

 

[financeguy]

Public sector salaries should be reduced by around 20% to 40% (not across the board, but on average) and defined benefit pension schemes ended. To do this, you need strong libertarian right wing governments - and that's not gonna happen today or tomorrow. The next generation is going to be very angry indeed because our generation copped out of the tough choices required.

 

[pcfitz80]

no - every paycheck money comes out for the pensions of retirees from my agency, so i better goddamn well get mine in 23 years.

Yes, I know technically the money comes out of salary but you have to realize even after this is done public sector salaries are at least as high if not higher than those in the private sector. So if you choose to count it as salary then the argument just becomes "are public sector workers overpaid?" Just an example, in my industry typical private sector salaries are in the 20 - 40 k range for most with a few making higher amounts and an even smaller number in the 6 figure range. while a government job in my industry pays 60-100 k + retirement benefits. I'm in meteorology BTW.

 

[pcfitz80]

Public sector salaries should be reduced by around 20% to 40% (not across the board, but on average) and defined benefit pension schemes ended. To do this, you need strong libertarian right wing governments - and that's not gonna happen today or tomorrow. The next generation is going to be very angry indeed because our generation copped out of the tough choices required.

The salary itself is an interesting question. Basically, your floor is higher but your ceiling lower. People in high paying professions (lawers) will make less in the public sector while those while those in lower paying fields make more.

 

[kramwest1]

Is it safe to assume that most/many public sector jobs are still unionized?

I think all of the publicly-employed people I know are in unions--certainly the retirees with pensions I know came from public sector, union jobs.

I think more private sector people need to think about re-unionizing.

That wouldn't solve the long-term unsustainability of the pension funds, but that it a separate issue from unionizing.

I think one possible solution to this is to reexamine the tax status of seniors. There are a lot of retirees that are living very comfortably and only using their social security checks to gamble and travel.

But then, the U.S. tax tiers/status as a whole needs to be reexamined, it is unsustainable as it currently stands.

 

[kramwest1]

The salary itself is an interesting question. Basically, your floor is higher but your ceiling lower. People in high paying professions (lawers) will make less in the public sector while those while those in lower paying fields make more.

Public sector health care professionals, too.

 

[pcfitz80]

Is it safe to assume that most/many public sector jobs are still unionized?

I think all of the publicly-employed people I know are in unions--certainly the retirees with pensions I know came from public sector, union jobs.

I think more private sector people need to think about re-unionizing.

That wouldn't solve the long-term unsustainability of the pension funds, but that it a separate issue from unionizing.

I think one possible solution to this is to reexamine the tax status of seniors. There are a lot of retirees that are living very comfortably and only using their social security checks to gamble and travel.

But then, the U.S. tax tiers/status as a whole needs to be reexamined, it is unsustainable as it currently stands.

Yes, I think most are unionized which is probably a big reason they have it so good. This is another question worth looking at...Should public sector unions be legal? In the private sector they provide a good balance because private sector employers are always trying to cut costs and to do so will squeeze as much out of employees as possible for as little pay as possible - This is a strong force and unions help to balance it by giving the workers some power which counteracts / balances it. The public sector is very different. Unions still provide the strong force acting on behalf of the workers but there isn't an equal and opposing force working as hard on the other side trying to cut costs and keep their demands within reason. Government employers easily cave in because they can just pass this expense on to a third party (the tax payer). While tax payers don't like high taxes most of us don't really think about where every dime of our taxes is going so the added cost from this one issue isn't really noticed. So everything is the opposite of what it should be. Jobs in the private sector that should be unionized aren't while those in the public sector that probably shouldn't be unionized are.

 

[kramwest1]

Yes, I think most are unionized which is probably a big reason they have it so good. This is another question worth looking at...Should public sector unions be legal? In the private sector they provide a good balance because private sector employers are always trying to cut costs and to do so will squeeze as much out of employees as possible for as little pay as possible - This is a strong force and unions help to balance it by giving the workers some power which counteracts / balances it. The public sector is very different. Unions still provide the strong force acting on behalf of the workers but there isn't an equal and opposing force working as hard on the other side trying to cut costs and keep their demands within reason. Government employers easily cave in because they can just pass this expense on to a third party (the tax payer). While tax payers don't like high taxes most of us don't really think about where every dime of our taxes is going so the added cost from this one issue isn't really noticed. So everything is the opposite of what it should be. Jobs in the private sector that should be unionized aren't while those in the public sector that probably shouldn't be unionized are.

That's an interesting point about the lack of a counterbalancing force to public-sector unions.

Many of the people that I have known who are unionized and in the public sector have a spouse or significant other who work in the private sector. The spouse is generally more free to change jobs and make what could be considered risky career or financial decisions because they have the stability of their partner's public job. So, there is some private-sector benefit to public sector employees.

The people that drive me crazy are those where both members of the couple work in the public sector. Often they will be preachy and judgmental without realizing how truly good they have it.

 

[pcfitz80]

That's an interesting point about the lack of a counterbalancing force to public-sector unions.

Many of the people that I have known who are unionized and in the public sector have a spouse or significant other who work in the private sector. The spouse is generally more free to change jobs and make what could be considered risky career or financial decisions because they have the stability of their partner's public job. So, there is some private-sector benefit to public sector employees.

The people that drive me crazy are those where both members of the couple work in the public sector. Often they will be preachy and judgmental without realizing how truly good they have it.

Yes, its generally best when forces are in balance though. Overall, most forces are pushing things waayy to the right economically. Due to globalization and changing technology the days of oligopolistic welfare capitilism are over. This is one of the reasons I am liberal on most economic issues because I think liberalism is a good balance to the forces in play driving things to the right. But on this issue there really isn't a strong force acting to the right, only one acting to the left.

 

[financeguy]

We can solve this problem in one of two ways: negotiation or revolution.

 

[financeguy]

Overall, most forces are pushing things waayy to the right economically. Due to globalization and changing technology the days of oligopolistic welfare capitilism are over.

I really hope you are right.

 

[pcfitz80]

I really hope you are right.

1) I am right 2) Why is this a good thing? Are you happy being less secure in your future than people were 30 years ago? I don't think enough people appreciate how vulnerable most of us are to what can be best described as "economic storms". The number of jobs vulnerable to 1) automation 2) globalization 3) changing technology, etc.. will continue to increase leaving us less secure and more vulnerable. Change is inevitable and I don't think we should turn back the clock and you can't protect jobs that are obsolete. But what is needed in this day in age is a strong social safetely net. Do you think that victims of natural disasters deserve help or should they have just learned to build a better home or known better than to live somewhere vulnerable? (most places are vulnerable to at least one type of natural disaster) Sweeping economic changes can be just as devistating and are equally beyonds one control in many cases. If your skill is in something that ships all its jobs overseas or automates you're out of luck. There will always be a growing number of jobs in the service sector though. Maybe you'll see my points 50 years from now when 75% of us have "mcjobs" and don't make enough to even have much savings.

 

[financeguy]

1) I am right 2) Why is this a good thing? Are you happy being less secure in your future than people were 30 years ago? I don't think enough people appreciate how vulnerable most of us are to what can be best described as "economic storms". The number of jobs vulnerable to 1) automation 2) globalization 3) changing technology, etc.. will continue to increase leaving us less secure and more vulnerable. Change is inevitable and I don't think we should turn back the clock and you can't protect jobs that are obsolete. But what is needed in this day in age is a strong social safetely net. Do you think that victims of natural disasters deserve help or should they have just learned to build a better home or known better than to live somewhere vulnerable? (most places are vulnerable to at least one type of natural disaster) Sweeping economic changes can be just as devistating and are equally beyonds one control in many cases. If your skill is in something that ships all its jobs overseas or automates you're out of luck. There will always be a growing number of jobs in the service sector though. Maybe you'll see my points 50 years from now when 75% of us have "mcjobs" and don't make enough to even have much savings.

Well, swings and roundabouts.

I work with people who have done the same job for twenty years or more (close to thirty, in some cases), never advanced or tried anything different, and I just can't understand that mentality.

 

[hiphop]

Well, swings and roundabouts.

I work with people who have done the same job for twenty years or more (close to thirty, in some cases), never advanced or tried anything different, and I just can't understand that mentality.

Maybe they were happy with their jobs. Maybe they felt lucky they weren´t fired. They maybe had a family and wanted some sense of security. Maybe they didn´t want to be flexible workhorses, chased around by neoliberal or libertarian right wing assholes who cashed off bonusses while kicking people out of their happy meal happy car homes.

How difficult to understand that mentality.

 

[financeguy]

Maybe they were happy with their jobs. Maybe they felt lucky they weren´t fired. They maybe had a family and wanted some sense of security. Maybe they didn´t want to be flexible workhorses, chased around by neoliberal or libertarian right wing assholes who cashed off bonusses while kicking people out of their happy meal happy car homes.

How difficult to understand that mentality.

Recently some of these guys refused to use a new technology which actually made their job easier if anything. Why: union rules. They also refuse to learn even the basics of Excel and similar packages - which, again, would make their jobs easier. It's not as those they'd have to pay for the training themselves, the company would pay. So I or one of my colleagues prints down a few hundred pages of reports every month because they refuse to open a simple email and open a spreadsheet. It's extremely waseful of paper, for a start. Now, unions are important and it may surprise you to know I am a union member myself, but come on.

 

[hiphop]

Recently some of these guys refused to use a new technology which actually made their job easier if anything. Why: union rules. They also refuse to learn even the basics of Excel and similar packages - which, again, would make their jobs easier. It's not as those they'd have to pay for the training themselves, the company would pay. So I or one of my colleagues prints down a few hundred pages of reports every month because they refuse to open a simple email and open a spreadsheet. It's extremely waseful of paper, for a start. Now, unions are important and it may surprise you to know I am a union member myself, but come on.

You didn´t tell about the refusal part. I thought with "trying anything different" you meant you couldn´t understand someone who doesn´t hop from one job to another. I agree that people who can´t be bothered to learn the basics of Excel must be a pain in the ass. Personally I think we should be ready to learn something new for all our life, and that´s not just a phrase.

 

[hiphop]

Instead of eliminating public sector pensions its private sector pensions that should have never disappeared and should be brought back. But is this realistic?

I basically agree. Whether it´s realistic or not depends on what taxpayers´ money is spent for. When trillions are used to bail out banks and buy/maintain expensive bloated military/weapons, while everyone (including the army) fears his pension will be gone sooner or later..

It´s the same with all finance. Politicians say there is no money for education. No money for healthcare. No money for this, for that, tit tat. 2008: big bang on the markets and all of a sudden the trillions are there, seemingly appearing from seventh heaven or something?

However, our rotten education system prevents me from understanding it all. I didn´t go to a posh Uni where they teach Adam Smith and David Ricardo in a fucking loop, I just got introduced to simple international development studies way back when. So I just understand it´s called betrayal.

 

[pcfitz80]

Recently some of these guys refused to use a new technology which actually made their job easier if anything. Why: union rules. They also refuse to learn even the basics of Excel and similar packages - which, again, would make their jobs easier. It's not as those they'd have to pay for the training themselves, the company would pay. So I or one of my colleagues prints down a few hundred pages of reports every month because they refuse to open a simple email and open a spreadsheet. It's extremely waseful of paper, for a start. Now, unions are important and it may surprise you to know I am a union member myself, but come on.

That sounds really ridiculous. How can a union have rules like that? It is probably because they think that while new technology will make the job easier this will eventually lead to less people being needed to get the same amount of work done and then people will get laid off. I bet you thats why. But you just can't stop progress. You may be suprised to hear me say this but keeping people employed at any expense can't be the number one priority of a good economy. Creating wealth is. It we all had the mentality of that union we'd have janitors cleaning the floors with toothbrushes. The tradeoff, however, is that we need a strong social safety net to help people who are displaced through no fault of their own. But until enough people are affected by this better safety nets won't happen because their is too much of the conservative mentality that says if you loose your job and can't get back on your feet its your fault! So because people think like that maybe that's why you have unions protecting jobs at any cost. one extreme begats the other! The bottom line is that either extreme is wrong: People who loose their jobs shouldn't be left out in the cold but obsolete jobs shouldn't be protected at any cost.

 

[financeguy]

That sounds really ridiculous. How can a union have rules like that? It is probably because they think that while new technology will make the job easier this will eventually lead to less people being needed to get the same amount of work done and then people will get laid off. I bet you thats why.

That explanation would be in some way justifiable and rational and would sort of make sense, but the real reason was a lot sillier. The technology was basically Palm Treos (a line of smartphone) for the sales reps in my organisation, so that they could log in to use the network while on the road. They refused to adopt because they feared management would use the devices as a sort of surreptitious back-door tracking device to keep tracks on what times they commenced work at. But, frankly, management is entitled to keep tabs on what times people commence work at, surely?

You seem surprised, but assuming you're American, some of the crap the Teamsters (for example) have got up to over the years is a lot worse than that. Plus look at the auto industry bailouts and and the ridiculous overstaffing and hard to defend pay packages and benefits in some unionised industries in the US. Everyone hates the bankers and Wall Street but if you go criticising the auto industry unions, you're attacking the workin' man and that's not on.

As I said, I am genuinely not anti-union on principle, but an awful lot of what they do in practice is hard to defend at times.

 

[financeguy]

The tradeoff, however, is that we need a strong social safety net to help people who are displaced through no fault of their own. But until enough people are affected by this better safety nets won't happen because their is too much of the conservative mentality that says if you loose your job and can't get back on your feet its your fault! So because people think like that maybe that's why you have unions protecting jobs at any cost. one extreme begats the other! The bottom line is that either extreme is wrong: People who loose their jobs shouldn't be left out in the cold but obsolete jobs shouldn't be protected at any cost.

I agree with you here. But, see, this is the gripe I had with Hiphop in the other thread. He thinks the Western capitalists are solely to blame for the Third World receiving a raw deal in global trade, but really, it's also due to the workers and their unions (farmer unions in this case). They lobby successfully for CAP and the similar arrangement in the US, I forget what it's called, in order to protect their livelihoods.

 

[hiphop]

I agree with you here. But, see, this is the gripe I had with Hiphop in the other thread. He thinks the Western capitalists are solely to blame for the Third World receiving a raw deal in global trade, but really, it's also due to the workers and their unions (farmer unions in this case). They lobby successfully for CAP and the similar arrangement in the US, I forget what it's called, in order to protect their livelihoods.

Now that´s going too far. The creation of CAP was proposed by the European Commission, not by farmer´s unions. CAP was born in the late 1950s and early 1960s when the founding members of the EC had just emerged from over a decade of severe food shortages during and after the Second World War. As part of building a common market, tariffs on agricultural products would have to be removed. However, due to the political clout of farmers, and the sensitivity of the issue, it would take many years before the CAP was fully implemented.

The CAP has always been a difficult area of EU policy to reform; this is a problem that began in the 1960s and one that continues to the present day, albeit less severely. The Agricultural Council is the main decision-making body for CAP affairs. Above all, however, unanimity is needed for most serious CAP reform votes, resulting in rare and gradual change. Outside Brussels proper, the farming lobby's power has been a factor determining EU agricultural policy since the earliest days of integration. This lobby's power has decreased markedly since the 1980s.

In recent times change has been more forthcoming, due to external trade demands and intrusion in common agricultural policy affairs by other parts of the EU policy framework, such as consumer advocate working groups and the environmental departments of the Union. In addition Euroscepticism in states such as the UK and Denmark is fed in part by the CAP, which Eurosceptics consider detrimental to their economies.

Proponents claim that the CAP is an exceptional economic sector as protects the "rural way of life", although it is recognised that this has an impact on world poverty.

CAP on wiki

Excuse the excursion, pcfitz80. Back to the topic public sector pensions.