This is a problem in the federal, state, and local governments right now. The biggest issue relates to pension plans and the government's commitment to defined pensions. This is playing out with major consequences all over the country. Every state is trapped in pension plans for its employees. I'm not sure how you can justify pensions for government workers when most workers in the private sector have no pension plans at all. I've never been offered one nor do I know anyone who has been offered one. Then again I don't have a powerful union arranging these things for me on my behalf.
I'm sure nothing is going to be done about this on a federal level as budgets are only a concern for state and local governments who in some cases have balanced budget amendments to deal with.
Unions never will accept pay cuts for its members instead preferring that members be laid off instead. I don't quite get the logic but that seems to be how it's playing out all around the country.
As a country we're totally broke right now and we need to start acting like it.
> I'm not sure how you can justify pensions for government workers when most workers in the private sector have no pension plans at all.
This is because until just recently most private sector workers had similar pension plans. These plans enabled companies to push their costs into the future and appear to be "saving" money by getting workers to accept smaller wage increases in return for better benefits. Fast forward to the 80s & 90s and the overhang from these plans started to come due; large companies were discovering that it was easier to declare bankruptcy and reorganize rather than live up to their prior commitments.
The problem is that it is harder for governmental entities to declare bankruptcy so that they can skip out on their obligations, the public also seems loathe to actually pay for the services they demand so the day of reckoning was pushed further ahead -- we have now reached the point where it is no longer realistic to continue this practice.
You may not have ever been offered a defined-benefit pension, but that just reveals your youth more than anything else. The tax code changes that allowed 401(k) plans to exist did not happen until 1980 and they were rather rare until the early 90s. The process of converting pre-existing defined-benefit plans into defined-contribution plans (aka "cash balance plans") was the source of a great deal of legal wrangling and numerous court cases.
As to why a union would prefer layoffs instead of salary cuts it is a rather simple logic. Salary cuts put the cost of decreasing payroll expenses entirely upon the workers, the business still gets the benefit of the larger workforce at a lower cost. By forcing layoffs the union seeks to make the business share in the pain: they pay less to their employees, but end up with fewer employees and a diminished capacity to operate the business. If the economy picks up again the business has to hire new workers and these workers join at the higher salary, while if the workers had accepted a pay cut they would have to once again fight the company management to get salaries increased to the point they were at before the cuts.
But pension problems are not just a legacy issue. Payments have increased recklessly in recent years. California's 3% at 50 law, which allows many public employees to retire with 3% of their final pay for every year worked at age 50, was passed in 1999. In 2005, BussinessWeek found that state and local pension obligations increased by 50% over the previous 5 years (source: http://reason.com/archives/2010/01/12/class-war).
Federal workers are also in a niche where it is hard to beat down wages. You can't send their jobs overseas as you could with steel workers or call center workers. You can't usually hire illegal immigrants (or non-citizens generally) as you can with painters, construction workers, etc. So their wages have been resistant to some of the trends that have hammered other wage-earners.
Actually as of right now it is easier for governments to get out of their obligations in that they can legally void union contracts (private companies can't do that according to federal law).
Do public sector unions make any sense at all? Are the members ultimately being protected from themselves as voters in a democracy? When you have a government monopoly on providing the service and a union monopoly on providing the labor...monopoly pricing seems likely.
All defined benefit pensions should be converted to defined contribution at current value.
I'm not really sure how they could make sense given that no one is representing the interests of the state itself in the negotiating process. I'm not sure anyone could either.
I'm not sure how you can justify pensions for government workers when most
workers in the private sector have no pension plans at all. I've never been offered
one nor do I know anyone who has been offered one.
Hmm, you must not know anyone over 50 or so. Defined-benefit pension plans used to be standard in the corporate world, and when they were phased out, most large companies grandfathered in people who were already on them (my dad recently retired on one that was phased out to new entrants about 15 years ago).
That's one difference that makes some of the discussions with reducing public-sector pensions strange. It's one thing to not offer them to new members, but another to retroactively abrogate contracts that were already signed.
> As a country we're totally broke right now and we need to start acting like it.
So if we're totally broke and need to start acting like it, here's what I propose, at a minimum: Let the Bush tax cuts for the richest Americans expire. And get the heck out of Iraq and Afghanistan as soon as possible, with a schedule to be totally out no later than say 30-60 days from today.
This "study" is useless without comparing people working similar jobs. Federal civil servants are typically white-collar, well-educated, highly-specialized professionals. The average private sector employee is not.
The overall impression I get from friends and family members in the DC area is this: there's a strong appeal to the stability and pension plans available from working for the federal govt (although for young workers, the pension plans aren't nearly as good). However, once you're fully vested in the pension plans, almost everyone switches to private industry because the salaries are higher. (Frequently, this actually means doing exactly the same work, but as a govt contracter through a private company rather than a direct hire.)
That's not completely true. Consider the difference in benefit rate. For private-sector, the benefits are about 20% of the salary. For federal employees, the benefits are about 50% of the salary.
Now, since large components of benefits (notably healthcare) are essentially fixed, independent of salary, then if private-sector jobs tend to be of a different class that are lower paid, then that fixed portion of benefit ought to make the benefit rate be higher for those private jobs.
But just the opposite is shown in the data. Not only do pub sec jobs get paid more, but they get a higher rate of benefits on that pay.
I can't conceive of any explanation for this difference that could be in any way equitable. All I can see is that pub sec workers get an obscene amounts of benefits relative to what I and my colleagues get -- yet the ones paying for that are, in fact, me and my colleagues.
> Is that equitable? No. But the problem is more on the side of private sector jobs providing no benefits rather than govt jobs providing too much.
Those private sector jobs are paying for the public sector benefits.... If their beneifts are inadequate, why should they be paying for someone else's better benefits?
If you think that you can run a private sector biz and provide more benefits than SOP, go for it. Your employees will have it better and you'll have better employees, which will let you crush the competition, which you clearly think is, at the very least, wrong.
a) The people with jobs without benefits are paying minuscule taxes, so it's wrong to say they are paying for the benefits of public sector employees in that sense.
b) Every time they buy something from a company that does provide benefits to some or all of its employees, those people are "paying" for someone else's benefits. But no one seems to complain about that.
This whole thing is an apples & oranges comparison. Right now, there's a class of jobs that gets benefits and a class of jobs that doesn't. Federal government jobs are overwhelmingly in the first category. Comparing them to the overall population of private sector jobs is silly.
> a) The people with jobs without benefits are paying minuscule taxes, so it's wrong to say they are paying for the benefits of public sector employees in that sense.
They're paying sales and gas taxes. They're paying property and utility taxes (either directly or through rent). They're paying garbage collection fees. They're paying for stamps. They're paying for licenses. And so on.
Poor people pay a lot of money that ends up in govt workers pockets. And they can't pick a different provider.
The people with jobs without benefits are paying minuscule taxes, so it's wrong to say they are paying for the benefits of public sector employees
I pay truly enormous taxes. While I enjoy a modicum of 401(k) benefit, it's several orders of magnitude less than the pension benefits of those being paid through my taxes.
those people are "paying" for someone else's benefits. But no one seems to complain about that.
Of course they do. Have you witnessed the number of people going to shop in WalMart to get low prices on overseas-made goods, rather than pay top dollar? What do you think is telling us?
They should break down that compensation according to positions. I once considered a government job until I saw that as a programmer I could make 18k more in industry. Over the years this has not changed considerably. This is vividly expressed by the remarks of the current red-headed poster child, minerals management services. There people could earn up to 2x their salary by going into private practice.
Where my own personal analysis has not considered is the defined pension plans (which I've always considered more of a liability due to their chronic underfunded nature.)
Sounds like an apples-to-oranges comparison. So many differences between the public employment sector and private. To pick just one example, probably the top pay for a government worker in any branch appears to be somewhere on the order of $100-200k (not sure exactly but I'd be shocked if it's 10x that much). But in the private sector, clearly the top pay (CEO's, hedge fund owners, entertainers and athletes) seems to be in the $100m range. That's a factor of 1000 difference at the top. So this is bound to throw off the averages. (They did say average, therefore mean, and not median.) And of course also in the private sector there are certain employment areas like farm work and restaurant workers where the pay is at or below minimum wage, some of which to illegal aliens and under-the-table cash pay that isn't counted. I'd be surprised if anybody that works directly for the government gets as low as minimum wage for anything. Plus add the fact that the mix/distribution of jobs in government is going to be totally different than in the private sector (eg., no strippers or baseball players work for the government) and they're making a truly apples-to-oranges comparison, and the conclusions they're implying are invalid.
TFA says "Most of this was the government's contribution to pensions". But also consider that decent health insurance for a family is getting up near $10K a year, and federal employees get pretty generous vacation time, which is probably worth several thousand as well.
So to take an example look at vacation time. If the average person is making $39 an hour (based on the USA Today numbers) and they accrue 8 hours per pay period + 4 hours sick leave per pay period that alone is 39 days of time off per year. Add the 10 vacation days and you're up to 49 days a year or $15,288.
Then look at Health Care. Supposedly a U.S. citizen spends an average of $7,290 per year on health care. Assume even one child and maybe a spouse (which are all covered under the employee's health care plan) and you get into some serious money.
I think there IS an apples/oranges comparison. Look at the salaries for PhD Chemists (published by ACS, as well as GS pay scales), private industry looks to be at least 10-20% higher than Govt grades. Google is your friend, albeit a wordy one...
And I think people forget that the GS retirement system changed for those hired in 1984 onwards. Before that, they had a pretty sweet system that didn't involve social security - so they could retire, work 10 years and double dip. For newer workers, they paid into and used the social security system from the start, making double dipping much much harder. Sorta sucked.
And the raises were terrible - in the mid 80's I saw 3%, 0%, 3% and 2% raises. No bonuses, stock options, etc.
So maybe the average private worker is paid less than the average government worker. But I venture to say that the average financial sector worker's doing well above any other-field worker you care to choose. Possibly including part-time bank tellers in with those trader types.
Wages have flatlined over the past 30 years, partially because the higher cost of benefits has absorbed what would have been a pay raise.
I'm glad whenever someone, whether they are government workers or union workers (or both), can secure a living wage. It's a victory for the entire middle class.
This newspaper story is somewhat misleading. It counts benefits as pay, including unfunded future liabilities, and draws no comparison between the composition of the private and public sector labor force. For example, federal employees are much more likely to have college degree. More on this here: http://faq.bea.gov/cgi-bin/bea.cfg/php/enduser/std_adp.php?p...
I do think it's a reasonable issue to examine, and that public-sector hiring, pay and liabilities have expanded too fast. I also think both political parties bear the responsibility for this.
The average (mean) is useless as a measure of central tendency when applied to a data set with outliers. Salary data has a highly skewed distribution with no shortage of outliers. If the author wanted to be credible, they should have compared apples with apples (federal employees vs. private sector employees with similar education/credentials) and printed the median pay of the two groups, or better yet, plot two histograms. As written, the article comes off as being the work of a know-nothing with an axe to grind.
Does anyone know how much a federal IT analyst make per year? If it's six-figures plus a full life-time tenure and pension. Then, I want to be on the American tax-payers' payroll!
Our un-winnable and unending adventures in Afghanistan and Iraq are orders of magnitude more costly than wages and benefits for federal employees. This is not to mention the cost of the Bush tax cuts.
Your link doesn't support your claim -- the costs of wages and pensions aren't even shown in it.
That's probably because your claim is incorrect. Consider:
http://srph.it/bpv3RU -
The deficit facing U.S. public pension funds will grow to $2 trillion, according to an interview that the chairman of New Jersey's pension fund, Orin Kramer, gave to the FT. "Estimates of aggregate funding requirement of the US pension system have ranged between $400bn and $500 bn, but Mr Kramer's analysis concluded that public funds would need to find more than $2,000bn to meet future pension obligations."
http://www.globalaging.org/pension/us/2010/analysis.htm -
The multibillion-dollar pension funds that promise to pay lifetime benefits to millions of the USA's retired teachers are more than $900 billion in the red, a new analysis shows. ... Actually, Pew said, the $1 trillion figure "likely underestimates the bill coming due" because it doesn't fully reflect "severe investment declines" in 2008.
http://www.globalaging.org/pension/us/socialsec/stanford.htm - (noting that this refers to California, rather than Federal)
"The simulation shows that the state would need to invest more than $200 billion, and possibly as much as $350 billion, today to return the fund to a minimum responsible level of funding," said Bornstein, who noted that the figure is approximately four times the current state budget.
I'm sure nothing is going to be done about this on a federal level as budgets are only a concern for state and local governments who in some cases have balanced budget amendments to deal with.
Unions never will accept pay cuts for its members instead preferring that members be laid off instead. I don't quite get the logic but that seems to be how it's playing out all around the country.
As a country we're totally broke right now and we need to start acting like it.