The Deputy and Teacher: The Economy and Their Pension

[StubbleJumper]

There are several problems I have:

 

Public sector employees expect to be uneffected by macro events. In a severe crisis that we now have, they still expect 100% job protection (no layoffs), and salary increases, even though state governments are in horrible fiscal shape due to rediculous spending mandates put in place during the credit bubble which falsely inflated tax receipts. Why should they not expect to tighten their belts like the rest of us. They consider themselves a protected class. This is arrogance.

 

Why should taxpayers be on the hook 100% for their pensions plans. This eliminates moral hazard. If they hire a terrible asset manager and the pension becomes underfunded due to terrible management, their attitude is: So What, the taxpayers will bail us out. Gee, that's a great postion to be in. Many corporations years ago converted their defined benefit plans to 401Ks and IRAs. We should mandate this for public employee pension plans as well.

 

Sure, public employees are insulated from a crashing economy, but they also did not really benefit from the soaring economy which prevailed from the late-90s to 2008.  They did not get wealthy from stock options when the stock market was setting records, they did not get ridiculously high retention bonuses when talent was hard to find, and they did not obtain large salary increases by jumping from one company to another.  And, interestingly enough, when times were good, they did not bitch and moan about not getting this type of compensation.

 

If people want good (but not fabulous) remuneration that is very low risk, then get a public service job.  If you want to make some real money (with some bumps in the road!) then stick with the private sector.  Personally, I do not begrudge their pensions in the broader context of their total remuneration package.

 

SJ

[mountboney]

"Personally, I do not begrudge their pensions in the broader context of their total remuneration package."

 

 

To me, the really offensive thing, and the really expensive thing, is that public employees are allowed to retire in their 50's with full pensions on taxpayer dollars.  The annuity values of these packages at that age are very often worth millions.

 

Increase the retirement age to 65-67 for all public employees and most of my objections go away.

[rmitz]

"Personally, I do not begrudge their pensions in the broader context of their total remuneration package."

 

 

To me, the really offensive thing, and the really expensive thing, is that public employees are allowed to retire in their 50's with full pensions on taxpayer dollars.  The annuity values of these packages at that age are very often worth millions.

 

Increase the retirement age to 65-67 for all public employees and most of my objections go away.

 

I am less concerned about the money (which as some people pointed out, you do trade off money for future pension and other benefits), but it's a waste of human capital for people to stop contributing so early.  There's really no reason for people to be retired so early in general.

[StubbleJumper]

"Personally, I do not begrudge their pensions in the broader context of their total remuneration package."

 

 

To me, the really offensive thing, and the really expensive thing, is that public employees are allowed to retire in their 50's with full pensions on taxpayer dollars.  The annuity values of these packages at that age are very often worth millions.

 

Increase the retirement age to 65-67 for all public employees and most of my objections go away.

 

 

We have people on this forum who worked in the private sector, invested wisely and retired in their 30s.  Nobody has ever cast aspersions on their decisions (and IMO, nor should we!).  They made their choices thoughtfully and courageously, and super-early retirement is their reward for having saved money while others were spending and for having been value investors while others chasing the flavour of the day.

 

The grass always appears greener on the other side of the fence!

 

SJ

 

I am less concerned about the money (which as some people pointed out, you do trade off money for future pension and other benefits), but it's a waste of human capital for people to stop contributing so early.  There's really no reason for people to be retired so early in general.

[rmitz]

We have people on this forum who worked in the private sector, invested wisely and retired in their 30s.  Nobody has ever cast aspersions on their decisions (and IMO, nor should we!).  They made their choices thoughtfully and courageously, and super-early retirement is their reward for having saved money while others were spending and for having been value investors while others chasing the flavour of the day.

 

The grass always appears greener on the other side of the fence!

 

SJ

 

Sure, that's their choice.  I won't begrudge anyone that; personally, my goal is similar: to not have to work.  I'd probably continue to work at a reduced level.  But at any rate, it is certainly wasteful from a societal point of view.  The people who have the best skills and experience exiting the system at or even before their prime?  Doesn't make sense.  Now, I will say that it does seem that really stopping contributing when you "retire" is also going the way of the dodo, so I think that's a good thing.

[Hawk4value]

I certainly agree a key fault with public employment is the incredible cost to the system of early retirement. Couple this with the fact that public employees are inherently inefficient, in other words, there are too many public employees doing a given job versus the private sector, and you have a perfect storm of costs spiraling out of control. Productivity is not the cornerstone of public employment. Gaming the system to retire early, and maximizing your retirement pay is the ultimate goal of most, if not all, of these people. And I know this for a fact, I have 3 relatives who are public employees and these are their primary concerns. This is the talk "around the dinner table", so to speak.

[SharperDingaan]

 

Keep in mind that a public sector objective is to employ as many as possible; so that they can gain work experience & move on to a better job if they so choose. 'Productivity' in the private sector sense, has very little meaning.

 

SD

[Hawk4value]

SD,

 

I understand what you are saying and I believe you are correct. But if the objective is employment without efficiency, then the gov't has abdicated its responsibility to act as a fiduciary with other peoples money---namely OURS. The "employment objective" also breeds corruption---politicians essentially bestow "jobs" on friends as political patronage with the objective of extending their power. Whether or not these jobs benefit the community is secondary.