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Old 09-22-2010, 01:45 PM   #1
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Are public sector pensions unfair?

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!
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Old 09-22-2010, 02:13 PM   #2
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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!
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Old 09-22-2010, 10:07 PM   #3
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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.
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Old 09-22-2010, 11:50 PM   #4
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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.
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Old 09-23-2010, 06:00 PM   #5
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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.
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Old 09-23-2010, 06:32 PM   #6
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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.
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Old 09-23-2010, 06:38 PM   #7
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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.
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Old 09-23-2010, 06:42 PM   #8
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no - every paycheck money comes out for the pensions of retirees from my agency, so i better goddamn well get mine in 23 years.
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Old 09-23-2010, 06:54 PM   #9
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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.
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Old 09-23-2010, 06:58 PM   #10
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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.
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Old 09-23-2010, 11:49 PM   #11
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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.
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Old 09-23-2010, 11:53 PM   #12
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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.
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Old 09-24-2010, 10:59 AM   #13
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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.
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Old 09-24-2010, 11:00 AM   #14
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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.
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Old 09-24-2010, 01:42 PM   #15
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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.
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