A few weeks ago I wrote a tale about Jack, an employee in Corporate America who has seen his pension whittled away over the past two decades. Jack, and Jill, and many others like them who work in the private sector, have had to adjust to a new world where 401K plans and their own savings will need to carry them through their retirement. If they will get any pension at all, it will be significantly less than what they were counting on when they started working twenty or thirty years ago.
But there’s another side to this story that is begging to be addressed – there are still workers who will be getting a pension.
Yes, many employees in the public sector – including teachers, cops, and politicians – are still guaranteed pensions that will replace a very healthy amount of their salary in retirement.
Consider the story of The Millionaire Cop Next Door, written by Rich Karlgaard for Forbes. Karlgaard writes that government workers are “America’s fastest-growing group of millionaires.” He estimates the value of an $80000 annual pension plus full medical benefits to be worth about $2 million.
The New York Times Ron Lieber writes that there is a war looming over public pensions. Lieber lays out the case for states to scale back their pension commitments. He cites a study by the Pew center that estimates the gap between the pension commitments and the pension funds to be one trillion dollars.
I say, bring the war on.
At least two states, Colorado and Minnesota, have started the war by taking steps to bring their pension deficits in line. They have passed laws that would (among other things) eliminate cost of living increases for retirees and increase employee contributions. Their retirees are suing the states.
There is no doubt that these public sector employees have lived up to their end of the bargain. And yes, this means they won’t be getting what they were promised. But this inequity between private sector and public sector employees (who have worked equally hard for what they have) is essentially a re-distribution of wealth.
These are pensions that are funded with tax dollars.
So while the private sector employee is struggling to invest money from his own $76 thousand dollar salary in an effort to retire in his late sixties, his taxes are being raised so that he can fund his neighbor’s government pension. I am not at all undermining the job that our teachers and public servants do – they are well appreciated. But is it equitable that the cop in Carlsbad, California that Karlgaard writes about should be able to retire at age 50 with an annual pension of more than $76 thousand dollars for the remainder of his life?
Sound fair? It’s not.
How long will it be before our lawmakers have the guts to take their own pensions and benefits to task? How long can this inequity between private sector and public sector continue? What’s your take?