The Real Income Disparity? Public Workers' Pensions Vs. Private Workers Retirement Plans
Chris W. Street writes at Big Government:
The Center for Retirement Research at Boston College just released an analysis entitled "Comparing Wealth in Retirement: State-Local Versus Private Sector Workers" to determine the wealth effect in retirement from 1996 to 2006 for former public employee versus the private sector workers at age 65, after adjusting for workers with similar characteristics of education and experience.The report concluded, "The results show that spending more than 50 percent of one's career as a state-local worker is associated with 11 percent to 18 percent more wealth at age 65." The data for the report was produced by a long-term nationally representative study that tracked more than 12,650 people in 7.600 households since 1992, asking the participants questions about financial standing, spending habits, retirement, pensions, and employers.
...Given that the return for private sector 401(K) investors, after inflation, has been flat over the 5 years since 2006, the public sector pension plans have artificially increased the wealth of public sector retirees at age 65 by an additional 68% since the end of the study. When added to the existing 11-18% income disparity in 2006, public employees can expect at age 65 to be 77% to 86% richer than comparable private sector workers. Does this really seem fair? Perhaps we should ask the Occupy Wall Street crowd whether this is "equal work for equal (retirement) pay."







The real entitled people are the ones who want people to work for them without adequately compensating them.
Public sector workers take less pay than they could in private industry in exchange for job and retirement security. You don't want to pay pensions, you're going to have to up salaries.
Expecting people to work for you for the sheer love of it is insane.
NicoleK at October 15, 2011 6:56 AM
Nicole is right on the money. The public has the same need to attract quality workers for needed services as a private company. There has to be something in it for the talent.
It's no secret that 401K plans haven't done well lately. In a strong economy, these numbers would look a bit different.
whistleDick at October 15, 2011 7:34 AM
During bad economic times, the relatively economically insulated public employees compensation packages often cause resentment from many in the economically less stable private sector.
It's during these times, studies show public sector employees doing better than their private sector counterparts.
What always seems to be forgotten, is how the private sector generally does better than the public sector in good economic times. In good times, public sector employees forgo much of the gains made by private sector employees, in exchange for some stability during bad times.
Will the same people now calling for public sector compensation to be reduced (to more closely match the private sector) being calling to increase the public sector compensation, when (if) good economic times return to boost private sector compensation?
cma at October 15, 2011 7:42 AM
"Public sector workers take less pay than they could in private industry in exchange for job and retirement security. "
Not true anymore. A federal engineering job equivalent to my skills and experience would be a GS-14 or 15. At GS-14 step 1, with the geographic adjustment for my location, that's already slightly more than I'm making. Go up to step 10, and with the geographic adjustment it's 40% more than I make. And their benefits are far better than mine, and they don't have to pay FICA tax.
(So why didn't I take that job, you ask? Believe me, I tried. The problem is that jobs like that are never open to the general public. If you aren't already in, you can't get in.)
Cousin Dave at October 15, 2011 9:40 AM
"Will the same people now calling for public sector compensation to be reduced (to more closely match the private sector) being calling to increase the public sector compensation, when (if) good economic times return to boost private sector compensation? "
That already happened. During the Clinton years and slightly before, there were big upward adjustments to the GS scale because of concerns about the government being able to get good employees. The GS scale has been competitive with private industry for most of the past two decades.
Cousin Dave at October 15, 2011 9:42 AM
> Public sector workers take less pay than they
> could in private industry in exchange for job
> and retirement security.
That's ludicrous. I don't believe it for a moment.
These are profoundly self-interested technocrats, completely incapable of competitive performance in anything except the most mundane office politics, the kind that happen in settings where excellence and service aren't required... That i.e., at taxpayer expense. They are, above all, cowards... But they're detached and selfish, too.
Crid [CridComment at gmail] at October 15, 2011 10:59 AM
"...and they don't have to pay FICA tax."
I'm pretty sure you're mistaken there, Cousin Dave. I'm not GS, but I am government and I pay FICA tax.
whistleDick at October 15, 2011 12:37 PM
Cousin Dave said. "That already happened. During the Clinton years and slightly before, there were big upward adjustments to the GS scale because of concerns about the government being able to get good employees. The GS scale has been competitive with private industry for most of the past two decades."
But that applies to Federal employees, while Dr. Helen's post refers to, "'Comparing Wealth in Retirement: State-Local Versus Private Sector Workers."
Also, it's hard to make a blanket statement about state & local public employees, since compensation packages vary widely from state to state, and even within the same state.
cma at October 15, 2011 1:20 PM
"Also, it's hard to make a blanket statement about state & local public employees, "
Yeah, and it's also hard to make a blanket statement about private sector workers. "But... but... it's different when I do it!" Yeah. I was unemployed for five months this year, and I had to take a job that pays 25% less than my previous job. And I'm lucky to have that. Don't you dare fucking lecture me about how I'm making too much money, you goddamn narcissist. You ain't no fucking princess. Go back to your sandbox and whine.
Cousin Dave at October 15, 2011 2:31 PM
> but I am government
I *knew* it! You wear the stink like dogshit.
Crid [CridComment at gmail] at October 15, 2011 2:41 PM
The fundamental problem is pay compression in the public sector. Most public sector jobs are unionized. I have no data to support my suspicions, but I think this means that the lower skilled/lower paid workers control collective resulting in the lower skilled workers being paid overall more than they would in the private sector. The higher skilled/higher paid workers are not overpaid compared to their private sector peers. One of the few things that the public sector does offer high skill workers is reduced chance of layoff and more generous benefits. High skilled public sector works do not get profit sharing or stock options. Be careful to compare apples to apples and oranges to oranges.
Bill O Rights at October 15, 2011 5:06 PM
"The higher skilled/higher paid workers are not overpaid compared to their private sector peers. "
Actually, they do, and have been for about two decades now. The thing about vastly underpaid government workers hasn't been true since the 1970s. Read what I wrote above about the GS scale.
"High skilled public sector works do not get profit sharing or stock options."
I don't get any of that stuff either.
Cousin Dave at October 15, 2011 6:44 PM
Government retirement packages are a scam. They allow for high-end loading, as they pay out according to the salary achieved during the last few years of work. Then, there are double-scams where the soon-to-retire worker is allowed to be a supervisor for six months, establishing an even higher base for retirement benefits just before leaving.
This is going to bankrupt the peasants (if not already). All retirement should be based on career average income. A plan based on yearly contributions to a 401K does this automatically. The plans would be funded along the way with no accounting gimmicks and accumulated obligations, and there would be no parting gift bumps in payouts because of a short tour at a higher pay level.
Andrew_M_Garland at October 15, 2011 8:41 PM
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