3. give boomers a cut, it's a one generation deal after that everyone else is screwed
I can understand if you are rich and have no morals why you would support this. What I don't understand is why old people are selling their own grandchildren.
Say what you will about the rich, they won't shaft their own. The boomers have sold us off very cheaply.
Can we please cut it with the boomers/millenial shit-flinging? There are plenty of boomers out there who don't have tons of money, even after multiple decades of working.
Yes. Young/childless people don't understand this, but there is nothing that older people want less than to harm their children. They've just spent the last 50 years of their lives taking care of their posterity so that they could have a nice life in a nice world. Parents and grandparents are not just going to muck that up casually; it would counteract everything they've worked for.
You can argue that the policies of the older generation have unintended consequences that will negatively impact younger generations, but it is not credible that the older generation as a class is intentionally selling out any part of their posterity that is currently living for short-term personal gain.
In aggregate, young people today have a lot of advantages that the boomers didn't have. Just talking about money is disingenuous. Poor people have always spent their entire income on living expenses - yes, rent now is more expensive, but food, clothing, and transport is much cheaper, for example. And no, the gap is not stark when you look at the boomers in their youth. It's only stark now, when the boomers have a lifetime of earnings behind them - hardly an apples-to-apples comparison.
And when we look at things other than money, the young today are better off than ever before. Remember when it was shameful to be seen to be pregnant in public? Remember when intellectually disabled kids were shameful and you were expected to keep them out of public view? Remember when every house had only one phone, and it was in a central area? None of these always-on-call compact contact and entertainment machines that travel with you. Remember when if you forgot to do your food shopping on Saturday, you'd go hungry on Sunday, because nothing was open? And this is before we even start to touch on equal rights for minorities and similar.
I don't have a problem if you complain about how we got here and are looking for a way to fix it, but just whining that you've been shortchanged while simultaneously ignoring all the better things about life... just sounds so adolescent. There isn't a boomer 'team' and there isn't a millenial 'team'. People don't fall into such overbroad demographics, at least not to any useful diagnostic degree. Boomers didn't get together and simply decide to fuck over their kids, so talking about them like that's what they did is just plain rude.
When the 0.1% nudges the pitchforks away they usually gesture in the direction of one of the two most convenient villains - boomers or robots.
I'm sure your grandma will be very sorry for her part in corrupting politics with money, deregulating the financial sector and de-taxing land when her social security is cut to the bone.
Sure, in the case of the guy that voted for his own pension.
But if you take a job and work it for two decades with the expectation of getting a pension, that pension is part of your salary. Clawing it back after the fact is complete bullshit.
> El Monte has a history of generous employee benefits — including a four-day work week for civil servants, who put in 10 hours a day and have Fridays off.
They often don't count brakes as work hours so 10 hour work day with 1.5 hours of total break time means 8.5 actual work hours per week, that's not bad.
Don't most people outside of the public sector work more than 40 hours / week? That said, even in the public sector, once you've transitioned into management; the 40 hour work week no longer applies to you.
No. Certain employment sectors like Silicon Valley and Wall St. have created cultures of expected overtime, but they're very unrepresentative. The US overall averages only 34.4 hours worked per week.
The US overall averages only 34.4 hours worked per week
Source?
Forbes (in 2014) says the average is 47 hours per week [1].
Wikipedia (data from 2015) says it's 8.4 hours per day for a man, 7.7 for a woman (although there doesn't appear to be data on number of days per week). [2]
OECD lists 1,790 hours per annum [3], which is 34.4 per week assuming no holiday is taken. The same OECD dataset gives the figure of 38.6 hours per week.
Salaried workers usually work more. Hourly workers typically don't. Firms that are required to buy health insurance for full-time workers often cap hourly workers at 39 hrs/week. When they run out of available worker-hours, "salaried" assistant managers etc. pick up the slack.
The claim isn't that forty hours a week is anything special, but that the flexibility to move around your hours to get a day off is.
Pretty much everyone I know, including the white-collar six-figures professionals, would consider that a pretty great perk. With the possible exception of other people in tech, for whom flexibility is more common.
Well, a 4-day working week is a decent benefit, one that many civil servants wouldn't get. Even though its balanced by longer working days, in a lot of places, those longer days would simply be unpaid overtime.
This is not correct. The 4 x 10 schedule exists in engineering companies and operating companies in the oil refining industry. Source: I work I. This industry and amange people who work a 4day x 10 hour weekly work schedule.
This 4 X 10 schedule or something similar (9/80) is useful to attract and retain engineering talent.
For labour, anything that can be fairly well measured in 'hours in' certainly anything paid by the hour, it makes sense. But it is definitely rare in office environments anywhere in a competitive field.
I'm still convinced that programmers working 35-40 hours weeks will generate more correct code than "high performance" office environments working 60-80 hours a week.
Four-day workweeks boost days with absent full-time staff by 50% (2 days to 3), creating more demand for overtime hours. That's part of the strategy. That is magnified by the fact that those workers will preferentially come in mainly/only on the 7th day of their workweek, requiring double paid time rather than just time and a half.
At some point CalPERS and the city of El Monte aren't going to be able to cover the costs of the defined benefits pension packages - there will literally be no money left to fund the ongoing costs especially given the demographics listed in the article.
Presumably some hard decisions will need to be made in the coming years. Given that "El Monte has more than twice as many [municipal civil servant] retirees drawing pensions as it does active employees" any attempts to legislate changes will be met with fierce political opposition until it's too late.
Repeal prop 13 and start redirecting the tsunami of unearned income away from landowners in California and towards the state budget and CalPERs could quite easily be made sustainable again.
The problem is that what they get is unsustainable. The public is on the hook for paying those pensions for decades. Which means there will be an ever-increasing pool of public retirees that that taxpayers will have to fund.
No, it doesn't. California pensions for example are such that even if the state dropped all other obligations and paid only pensions even with massive tax increases pensions could not be fully paid. This mess will unwind in the short term. Yet another argument for some kind of basic income alternative.
This is what should be scary. If this "crisis" is just because we know the numbers now, and there's a hidden crisis in the public sector where people don't even realize how screwed they will be a decade into their retirement? 401k plans are way more opaque than pensions.
No way man. The civil servants who are honest with themselves recognize that they didn't provide enough value to the city while working to justify their pensions.
This is a situation where the group of people who make the rules are the people who will benefit from the rules, and someone else foots the bill.
Considering their pay (inclusive of benefits) is literally bankrupting the state it would seem rather obviously true that they are collectively overpaid.
OK, so raise the wages during the time they're working, in order to be competitive with other industries, and provide a 401(k) with matching contributions like the private sector does.
Except that will cause a tax increase now rather than a tax increase twenty years from now, and is political suicide.
Underpay during working years and promise an outsized pension to make up for it (since that passes the buck of having to fund it to some other sucker who's in office much later on) is a common pattern in the public sector. If you want to end it, you can simply pay competitive wages up-front (and no, pointing to a handful of outliers does not indicate that the average public-sector salary is competitive with private sector).
Or it means the state has made too many promises without allocating sufficient funds to cover them.
Government would be so much cheaper if they didn't pay the workers and instead just made them straight up slaves! Also, they need to find workers that don't need food or energy, since those cost money.
There are two groups of people letting the state government make those promises: citizens, and investors.
Citizens and their representatives aren't paying attention, don't care about pension issues, or don't understand them/aren't having the costs explained. Investors are buying bonds from the state either without performing due diligence or assuming that the state will get bailed out if they do run out of money.
If the supply of housing, healthcare, and education is fixed, as it is in NYC, SF, LA, and other such places, paying everyone more money doesn't make anyone better off. Everyone will just bid up the prices of these goods, until the average person can once again barely afford them on their new salary. Elizabeth Warren wrote about this in The Two-Income Trap: a family with two incomes today actually has less disposable cash than a single-income family from 1975, because the extra money all gets eaten by bidding wars.
The book covers that. The average size of new homes has increased by 40 percent, but that's just new homes, a minority of the housing stock.
"In fact, the size and amenities of the average middle-class family home have increased only modestly. The median owner-occupied home grew from 5.7 rooms in 1975 to 6.1 rooms in the late 1990s—an increase of less than half of a room in more than two decades. What was this half a room used for? Was it an “exercise room,” a “media room,” or any of the other exotic uses of space that critics have so widely mocked? Nope. The data show that most often that extra room was a second bathroom or a third bedroom.
The wealthy may be living in spacious new digs, but middle-class families are not. The proportion of families living in older homes has increased by nearly 50 percent over the past generation, leaving a growing number of homeowners grappling with deteriorating roofs, peeling paint, and old wiring. Today, nearly six out of ten families own a home that is more than 25 years old, and nearly a quarter own a home that is more than 50 years old."
What is wrong with living in an old house? Old wiring, depending on when it was put in, isn't necessarily bad. Knob and tube wiring (a really old style) can probably never start an electrical fire (assuming the outlets are periodically replaced) because the conductors are separated by 18 inches or more. A roof needs to be replaced every 20 years or so. Paint, more often. If the house you own has peeling paint or a leaking roof, look in the mirror and blame that person. Don't blame the age of the house.
apsec112: Just paying everyone more when everyone buys things in inelastic markets like housing doesn't make anyone richer. This can be observed empirically with two-income households in 1975 vs today; people pay more today for the same thing they had in 1975.
alasdair_: Houses are bigger today (perhaps he meant to imply that actually we all are richer today because we're actually paying more for something better)
apsec112: A small number of houses today are bigger, but most people live in old houses that aren't any bigger; IOW we are paying more for the same as what we had in 1975.
blackguard: Old houses are ok too! (yes they are, but that's not germane...)
Houses are a depreciating asset, and should be seen more like a car than anything else. Japan gets this right.
While some houses are built to last and worth saving (e.g. most houses you see still standing 150 years later) - most are definitely not. Trying to maintain a typical poorly constructed wood frame McMansion for 100 years probably doesn't make a lot of sense.
Plus I've lived in old crappy houses. Old wiring definitely sucks - you may be limited in a room you want to do something else in, and then realize you can't do much due to the plaster walls to fix it short of gutting the entire area. Most plumbing is only really rated at 20-30 years, but it's rare to ever see anyone replace it wholesale.
I've lived in crappy yet well maintained (but not updated) houses and it's not that much fun.
I shouldn't get upset or angry that they get paid well above the market value of their labour? And that as taxpayers and future taxpayers, my children and I are on the hook to pay for this?
His point is that you should get upset that the "market value" is too low (e.g. due to information or other asymmetries that give advantages to the holders of capital which aren't generally available to labor).
That's an interesting perspective. Can you elaborate? How do you think that public sector unions are disadvantaged by not having enough information? Do you think that rewarding them with an enormous supplementary pension fixes the market for their labour?
I don't think public sector unions are disadvantaged. That group of disadvantaged folks would be private sector workers. I believe the argument would be that, to a certain extent, their pensions and other benefits do "fix the market" for their labor. I'm not sure I agree with the argument. My view would be that if the unions were as effective as they could be the workers' salaries would be higher and the pension benefits a bit lower.
Police Officers in places like Cornwall, Ontario, pretty far out there, where the average home price is probably just above $100K ... often earn well over $100K.
Nurses, Teachers, a plethora of questionable Directors (the Director for 'Clergy Services' the hospital earns a lot. How many staff? And how big is that responsibility?) all earning well north of $100K, esp. in rural areas where cost of living is low. Private sector salaries will be lower to reflect lower cost of living, but public sector wages are not.
Note that 'public sector' employees are near the top.
The group earning more is 'utilities' - which in Canada are 'Crown Corporations' (or de-facto), meaning essentially public sector.
Where I live in Quebec, the 'best career path' for most people is 'Government', as it turns out, we have almost the lowest wages in North America, just ahead of the other Canadian Maritime provinces.
One of the most overlooked factors in government work is the 'riskless' nature of it. In finance, we learn that 'consistent payments' have quite a lot of value, which is why companies that pay very consistent dividends are worth more. That you have 'a zero chance of layoff, and a very low chance of being fired' is actually a benefit, and it's economically measurable. It's a premium and it's worth a lot.
That's why I think the only kind of pensions that should exist are public pensions -- something all citizens get access to. Work-specific ones, especially in the public sector are prone to these sorts of issues. Yes, there's still issues with government mandated ones, but I'd argue they get way more attention given that they affect so many more people at the same time.
What isn't mentioned here is that the state usually mandates binding arbitration for public safety employees, which eliminates the ability of the municipality to negotiate. That's how police pensions get so crazy -- the pension allows the city to kick the can down the road vs a 10% raise or whatever.
The supplemental pension thing for bigshots is another matter. That's pure greed, and a city shouldn't be able to do such a thing if the are part of the state system.
Exactly. Here in PA, the state police cost more in benefits and retirement than then cost for salary from day 1. Add to that their retirement is based on their 4 best quarters and that includes overtime.
I'm not saying that they should be paid a good wage plus money for their high risk occupation. It is just that pensions are pyramid schemes and not sustainable. And anyone who says just raises taxes to make them sustainable is proving that they aren't sustainable.
We need to get rid of pensions and switch to fixed contribution. If people run out of money, then use taxes to fund social programs to help them.
The state has been unable to get the union to drop it. Also a few years ago there was a manhunt for a cop killer. The total cost was $11 million, largely all overtime. How much do you think that is going to cost taxpayers during the life of all of these cops' retirements? (a lot !!!)
Facts are a bit thin on the ground in the article - they list the city manager as poster child, and that's that. You'd like to see averages to get the picture how generous the city government really is. I guess it's all "fake news".
This is a general problem with LA Times muckraking. They do a lot of articles like this, with a single example used to backstop a whole narrative.
I'd call it Tribune more than just LA Times, and I'd note that the single example they use is generally an outlier. If they used an example from the median it'd be a lot harder to get people worked up.
If you want a maddening read, Google for "Transparent California salaries" + your city name (I won't link it because they have some of anti-adblock thing going on now) [1]. Many public sector employees have wages that are more than competitive with the 1% of the private sector; after you factor in the incredible benefit of a pension and early retirement, it's not even on the same order.
One problem with government that is usually true is that it can grow, but it can't shrink. This applies to cost, workforce size, and benefits.
We're at a strange turning point right now. Pensions in the private sector have all but disappeared. Pensions in the public sector are alive and well because it doesn't need to be self sustaining, and by running huge deficits it can steal the money it needs today from future generations.
It's pretty obvious that cities and states should start eliminating pensions, but the beneficiaries of those same pensions are the people that need to do that. I'm not holding my breath for the right thing to happen here.
[1] Sorry if you're not in California. Your state/country may have similar open information.
The private sector has a strong incentive to drive down compensation (wages and pensions) in the public sector since it drives down the cost of labor for them too.
>it can steal the money it needs today from future generations.
1) Future generations aren't buying our T bills. People are. Future generations will be receiving as well as paying interest.
2) Trying to make a moral case for stealing money from pensioners and giving it to the wealthy in the form of tax cuts is hard, but you gave it your best shot.
> 1) Future generations aren't buying our T bills. People are.
Right. Future generations are the ones paying the interest on them (and other government-issued debt).
> 2) Trying to make a moral case for stealing money from pensioners and giving it to the wealthy in the form of tax cuts is hard, but you tried your best.
I imagine you already know it, but I didn't say anything to this effect at all.
> 2) Trying to make a moral case for stealing money from pensioners and giving it to the wealthy in the form of tax cuts is hard, but you gave it your best shot.
He did not say that, as you know. The usual argument in these cases is not to take away pensions from people who have earned them, but rather to cease offering this benefit going forward to new city employees.
There are police forces in the UK where 50% of their annual budgets is going to people who no longer work there. This is _insane_. Pensions should be funded from savings / investments made during working life, not taken from future tax recipes.
Furthermore these pensions are gold plate: linked to inflation and guaranteed for life. We have 100s of thousands of middle tier public sector workers like teachers and council workers retiring every yesr with a guaranteed income stream that would cost millions if you were to buy the equivalent annuity.
How anyone thought this was sustainable or sensible blows my mind. It needs to stop.
> This is _insane_. Pensions should be funded from savings / investments made during working life
you might think that the people responsible for providing the pensions would have taken the contributions that the workers made during their working life and invested that money for the future!
Unfortunately, that didn't happen. The UK government (who was the responsible party) made the decision to pay pensions out of future income rather than saving anything. It looked great on the balance sheet, since they could reduce taxes today and let somebody else look bad in the future.
It appears the majority of people don't understand that the national debt, and other unfunded liabilities, are future taxes. The socialist workers party is very popular in my country too despite eating the future in order to play Santa Claus in the present.
Invested the money in what exactly? This essentially requires the government to decide what investments they think will be winners and losers, whilst influencing the rules that help decide who wins and loses. That would be politically controversial to say the least.
Same thing a smaller-volume investor would do to spread their risk? A mixture of bonds (gov't giving itself money, to earn a return, ha!) and stocks (probably a wide index fund, both US and international).
Deciding on the breakdown of what percentage to allocate to each bucket and how many stocks from each category to use in your index would be an interesting debate to have though.
There are a number of miscalculations which mean contributions would never have funded these schemes.
One is the number of years people live after retirement. Another is that pensions (due to their terms) have outpaced wage growth significantly so current contributors can't fund them. Finally, a pension relative to final salary is difficult to fund from a percentage of mostly from early-mid career wages.
In the UK, many public sector organizations have been privatized. Early privatizations often took the pension liabilities with them. As the employees who were members of such schemes leave the scene and current organizations must choose between meeting obligations and making a profit, I expect to see the companies look to duck out of obligations perhaps by packaging obligations into a spinoff company and then watching it go bankrupt.
A lot of retirees I know are pulling money out of these schemes using the new option to take the money as cash. They then put the money into buy to let as a kind of annuity on the basis that even if they'd get more money from the scheme in the long run, they aren't a position to take that kind of a risk. Hope they have insurance.
> There are police forces in the UK where 50%
> of their annual budgets is going to people
> who no longer work there
Source? In 2009 20% of policing costs in the UK went to pensions[0], which doesn't seem that particularly insane; has it really risen so much, or are there certain police forces that aren't representative due to shifting demographics?
> Pensions should be funded from savings
> / investments made during working life
Perhaps, but I don't see the relationship between this and your previous point.
> these pensions are gold plate: linked
> to inflation and guaranteed for life
So ... an inflation-linked annuity? How does that differ from most private pensions? Is there anything stopping you purchasing one?
> teachers and council workers retiring
> every yesr with a guaranteed income
> stream that would cost millions if you
> were to buy the equivalent annuity
This also needs sourcing, as it also fails the sniff test and some simple Googling. Taking the example here[1], a relatively senior teacher, looks like she'll get an annual pension of ~£20,000 if she retires at 60, which is probably equivalent to a private annuity of £500,000.
> a relatively senior teacher, looks like she'll get an annual pension of ~£20,000 if she retires at 60, which is probably equivalent to a private annuity of £500,000.
There is the problem. I've had a 8% pension in the programming sector since I was 20, my projections are for £300,000 by age 67 and £10,000 retirement income.
Teachers get 12 weeks off a year and to retire 7 years earlier on double the pension.
Personally, I'm retraining to be a teacher.
Pension calculators from the likes of legal and general show that you need vast pension contributions to match public sector employees. To match a teacher it recommended I made a 15% contribution, is any private sector company offering that?
I was writing a long reply, but it boils down to: if you think you'll earn more as a teacher than as a reasonably skilled developer, even including pension and holiday, let's hope you're not teaching arithmetic.
You should take a look at annuity tables. 20k rpi-linked at age 60 will cost you nearly a million.
There are very, very few people retiring from the private sector with pension pots worth this. And those that are probably fall into the "fat cat 1% elite" so derided by the left.
Paying for roads, teachers, police, freeways etc. ... Stuff you actually use ... The real question is what do the feds do with 30% of your money? Apart from dragging you into endless wars of course
Are you arguing that WA doesn't have high sales taxes? Many municipalities in WA also have additional taxes as well. Seattle and Tacoma, for example, has 9.6% sales tax. Bellevue, 9.5%. Spokane, 8.7%. Vancouver, 8.4%.
'folly asked how Washington state raises revenue without income tax. 'redx00 and I answered. Do you disagree that sales (and real estate, and other taxes and fees other than income taxes) are how Washington state raises revenue?
This subthread stems from the WA/CA contrast. I was just pointing out that WA's sales tax is lower than CA's, implying that WA provides comparable infrastructure with just a sales tax as CA does with high levels of both sales tax and income tax.
I believe there are a myriad of other taxation that goes on and someone just had to compare where the dollars are coming from - example cigarette taxes, alcohol taxes, property taxes, lottery etc etc
The funny thing is, the effective new property tax rate in Oakland or SF is something like %1.2-%1.5, which is bigger than Seattle King County's tax rate of %1. And Seattle has better roads than the bay area, no state income tax, a lower sales tax and has rainy weather. I don't get it.
> the effective new property tax rate in Oakland or SF is something like %1.2-%1.5
Do you mean the tax rate on new properties? Or the effective rate actually collected, given the restrictions on how much property taxes can rise, etc? I thought one problem in California was that the latter figure, which is the more relevant one, was very low as a result of Prop 13.
The other problem in California is that it just seems to not spend money very well, as far as I can tell...
Yeah. The tax rate that is collected whenever you buy a property and 'reset' the prop 13 timer. %1 for the base rate, plus a bunch of other one off fixed charges that add up to the %0.2-%0.5 rate. People who have had prop 13 properties for decades have something like a %0.3 equivalent property tax rate.
I checked for my city and there are a couple fire fighters with salaries of $45k-$75k a year but made $140k-$180k in just overtime and overall total comp of $220+. How does that even happen?
Guess it happens for the same reasons that company hires consultants (easy to get rid of) but does fire fighter consultants exist? Ergo understaff and pay overtime rather than adequately staff the station. easy to cut down on overtime.
My understanding is that overtime scams are common in parts of the public sector.
The usual scheme is that you are not punished for not showing up to work, but are paid overtime for taking someone else's shift. As a result, swapping shifts with someone results in a 50% pay increase for both of you. Together with other scams, the result may be even greater.
> It's pretty obvious that cities and states should start eliminating pensions, but the beneficiaries of those same pensions are the people that need to do that.
There's an easy way around that. "All existing pension-holders will continue receiving benefits as defined. All new public employees will receive investment-based retirement plans funded during their employment." Then existing pension-holders have no reason to vote against it. This also seems far more ethical, as it retains the guarantees given to existing recipients.
The company I worked for phased out its guaranteed-minimum-benefit retirement program, in favor of its standard investment-based retirement program, by doing exactly this: limiting eligibility based on initial hire date.
The article says that El Monte did this - they abolished the supplemental top-up pension in 2008; but paying just those few who qualified for it from 2000-2008 is devastatingly expensive.
I agree though - cancelling plum benefits while grandfathering existing recipients is the only politically tractable approach.
> I agree though - cancelling plum benefits while grandfathering existing recipients is the only politically tractable approach.
How about the approach that was used in the 80s ? 20% year-on-year inflation for a while with the government lying about it saying it's 5% ? That "reduces" liabilities by 15% per year.
As an on-again-off-again libertarian, my preference would be for the government to do as little as absolutely possible so that we might never have to deal with public sector unions again. Then there are no incentives to lie.
I believe several states in the USA have taken this approach already. Some states made the switch soon after the 2008 real-estate crash and market meltdown. They have the old plans for older employees and new hybrid/stock market based defined-contribution plans for newer employees.
Also, many state pensions aren't that great compared to California, etc. Employees only get 40 to 50 percent of their former salaries under a lot of pensions. I've never understood how California can do 80% pensions. The Federal pensions have some very high percentage too (not sure what it is).
Or instead of eliminating Pensions, start actually collecting the money properly. I work at for a government pension plan (in Canada). We make more money every year than is paid out, and are more than covered for future years at this point.
No reason pensions don't work. But it requires a responsible government. And if you could give the rest of the world some of that responsible government, we'd all appreciate it.
CPP isn't for government employees, it's for everyone. The government doesn't run the pension plan for it's employees, they have corporations that do that, so they're independent of the government, and won't allow them to play shenanigans with being underfunded.
The issues with pensions in most of these states is that they don't fund the pensions. Lavish benefits are given, especially in public safety settings, and are not funded.
States that don't steal from the future (New York, Wisconsin, Oregon, the dakotas, Idaho, Tennessee) fund their pensions. States like Illinois, California and Massachusetts do not.
Pensions aren't a problem, bad governance is. It's easy to say that it is "obvious". But the obvious solutions come with non-obvious blowback.
What do you do when a 50 year old fireman throws out his back dragging a hose and ends up on disability for 15 years?
What do you do when a burned out policeman shoots someone accidentally or has a heart attack and gets a fellow
Officer killed.
Retirement at 50 is not the way to solve the risk of ageing bodies on physically demanding jobs. 30 years of fire/policing experience is perfect for training, fire prevention, home / business security advice, more administrative roles and generally being the mentor for the newbies.
Alternatively if there are too many physically demanding posts make it more like the armed forces and get rid of most people between the 10-20 year mark with a smaller pension and assistance with finding new work. 50 is a terrible time to push people into a new career.
It used to be that private companies paid a heck of a lot more than they do now. The public sector won't let social welfare programs pick up the slack so that company heads can make billions.
These local government employees are normally not covered by social security insurance. This allows the local governments to pay very little. So while, yes, their pensions are now out of the norm, those employees would need to be paid more in the near term to make up for the deduction of social security insurance out of their paycheck.
Furthermore, this would only address current employees and not the prior employees who never paid into social security and have nothing but their local pension to fund their elder years.
The median is far more important, I think. I am going to receive a pension when I retire for the 4 years of full time work I did at a hospital. I think it's going to be on the order of $28 a month.
Outliers gonna be outliers, yo. This kind of article crops up every now and then when a journalist rediscovers this information is public. They always focus on extreme outliers, and never even mention what the median situation looks like.
One reason pension plans are perpetually out of money is that they are allowed to assume that they will make around 6-8% a year from investments, rather than funding based on a riskless instrument like a T-Bond, which only gets you 2-3% a year. This means most pensions are funded only about half if what they should be.
You might think this sounds reasonable, because historically equity markets do return something like 6-8% a year over the very long term, but the pension benefit is fixed and riskless in the sense that the city must always pay it out, so the investment should also be similarly risk free.
Otherwise, if investments fail to perform, then taxpayers are always left holding the bag, as we see every time a market downturn occurs. Heads I win, tails you lose...
Indeed, it made the news here in the UK when the Bank of England was funding it's pension liabilities with assets that matched, instead of the more common "hope for 6-8%" return method.
Pensions are a way for negotiators to kick the can down the road - and often they're negotiators who by the time it becomes a problem will have taken their own pensions or golden parachutes and retired far away from the town or state in question.
It's also a lot easier to blame the people still around hoping to collect the pensions they were promised (and for which they took lower wages) than to blame others who screwed things up. I kind of feel that it's perfectly legitimate for legislatures to cut pensions as long as they also come to a retroactive agreement with the people affected to compensate them for the lowered pay that they took all those years ago, plus interest, and if it's going to be a lump sum cover any increased tax burden due to the size as well. Basically if you want to cut the pension, you have to retroactively fund the 401k or IRA that would make up for it.
Or of course they could work out a formula that attempts to cover part of the shortfall from the pensions of those who created the problem by chronically underfunding - legislators, governors, mayors, council members, superintendents, etc. for public pensions, the retired CEOs and board members and their estates for private pensions. I can't imagine that there'd be any screaming about that. It wouldn't make much difference in the amount of cuts, but it might be a deterrent to prevent similar issues in the future.
Consider Illinois, which has massive pension problems at the state and local levels. The state and towns/cities negotiated contracts that included pensions at a known level and had a pretty good idea of how much they needed to be funding in advance to cover those obligations, but instead of actually doing so they spent the money elsewhere on things more likely to get them reelected. It's like putting 1% in a 401k so you can spend the rest on parties every weekend, then screaming at retirement time that there's not enough in there to support you.
There are absolutely abuses and outliers - abuses where the senior decision makers implement policies that dramatically increase payouts, then retire to take advantage of those increases as I believe was the case in this article. Abuses like that happen in the corporate world as well, where they're often called "golden parachutes." Anyone else here remember reading about companies paying senior executives tens or hundreds of millions in compensation just to get rid of them?
There are also folks who've worked several different jobs, each of them with a pension that vests fully after 15 or 20 years, so once they actually retire they're able to collect separate full pensions from several different bodies or even occasionally from the same one - consider someone who was a police officer or fireman for 20 years, then "retired" and moved to another job in the same municipality. That person may well have a police/fire pension plus another civil service pension. I'm pretty sure Illinois and probably other places are working on reducing those with rules that limit the number of full pensions from one entity that people can get, but that won't make a huge difference.
What happens regularly is that you'll see stories like this that highlight the outliers - particularly outliers that were previously in the most senior positions - and use them as an argument for how the whole system is broken and needs to be scrapped. Expect to see those most often from the Tribune companies (multiple papers, headlined by the Chicago Tribune and LA Times) and Wall Street Journal (News Corp).
"There are also folks who've worked several different jobs, each of them with a pension that vests fully after 15 or 20 years, so once they actually retire they're able to collect separate full pensions from several different bodies or even occasionally from the same one..."
This. It's common in CA for posts like Chiefs of Police to "retire" as soon as they are fully vested and split for another jurisdiction and a fresh pension hunt.
I honestly can't say if public salaries and benefits, including pensions, are too high or too low. But one thing I've noticed is that when salaries become a matter of public debate, it always invites a reaction from folks who believe that salaries are too high. There could be a variety of factors involved:
1. Most people make less money than people such as government officials, research professors, and the like, because most people are unskilled laborers. So it always looks like the salaries that we read about are exceptionally generous.
2. There's a cultural belief that government workers are lazy and incompetent, and their jobs are "easy" in a physical sense compared to unskilled labor and the construction trades, so we assume they're overpaid.
The result is a natural political pressure to reduce salaries and benefits for public workers.
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[ 3.0 ms ] story [ 203 ms ] threadStep 2: Stir up resentment between people on slashed wages and retirees.
Step 3: Leverage that resentment to manufacture consent for slashing pensions.
Step 4: Tax cuts for the wealthy.
2. let banks farm the young via land prices
3. give boomers a cut, it's a one generation deal after that everyone else is screwed
I can understand if you are rich and have no morals why you would support this. What I don't understand is why old people are selling their own grandchildren.
Say what you will about the rich, they won't shaft their own. The boomers have sold us off very cheaply.
You can argue that the policies of the older generation have unintended consequences that will negatively impact younger generations, but it is not credible that the older generation as a class is intentionally selling out any part of their posterity that is currently living for short-term personal gain.
And when we look at things other than money, the young today are better off than ever before. Remember when it was shameful to be seen to be pregnant in public? Remember when intellectually disabled kids were shameful and you were expected to keep them out of public view? Remember when every house had only one phone, and it was in a central area? None of these always-on-call compact contact and entertainment machines that travel with you. Remember when if you forgot to do your food shopping on Saturday, you'd go hungry on Sunday, because nothing was open? And this is before we even start to touch on equal rights for minorities and similar.
I don't have a problem if you complain about how we got here and are looking for a way to fix it, but just whining that you've been shortchanged while simultaneously ignoring all the better things about life... just sounds so adolescent. There isn't a boomer 'team' and there isn't a millenial 'team'. People don't fall into such overbroad demographics, at least not to any useful diagnostic degree. Boomers didn't get together and simply decide to fuck over their kids, so talking about them like that's what they did is just plain rude.
I'm sure your grandma will be very sorry for her part in corrupting politics with money, deregulating the financial sector and de-taxing land when her social security is cut to the bone.
But if you take a job and work it for two decades with the expectation of getting a pension, that pension is part of your salary. Clawing it back after the fact is complete bullshit.
Working 40 hours per week is a generous benefit?
Forbes (in 2014) says the average is 47 hours per week [1].
Wikipedia (data from 2015) says it's 8.4 hours per day for a man, 7.7 for a woman (although there doesn't appear to be data on number of days per week). [2]
OECD lists 1,790 hours per annum [3], which is 34.4 per week assuming no holiday is taken. The same OECD dataset gives the figure of 38.6 hours per week.
[1] http://www.forbes.com/sites/niallmccarthy/2014/09/01/a-40-ho...
[2] https://en.wikipedia.org/wiki/Working_time#United_States
[3] http://stats.oecd.org/index.aspx?DataSetCode=ANHRS
Pretty much everyone I know, including the white-collar six-figures professionals, would consider that a pretty great perk. With the possible exception of other people in tech, for whom flexibility is more common.
Most competitive company white collar staff probably put in a little over 9 anyhow.
This 4 X 10 schedule or something similar (9/80) is useful to attract and retain engineering talent.
We did 4x10 in the summer (we're public though). We did MTWH then TWHF and repeat giving a 4 day weekend then a 2 day weekend.
Presumably some hard decisions will need to be made in the coming years. Given that "El Monte has more than twice as many [municipal civil servant] retirees drawing pensions as it does active employees" any attempts to legislate changes will be met with fierce political opposition until it's too late.
Just because you don't like how the current system is set up, doesn't make it not so.
the problem starts when the tax income shrinks
Everyone here complains people haven't saved enough, yet wages have been stagnant for decades.
This is a situation where the group of people who make the rules are the people who will benefit from the rules, and someone else foots the bill.
Except that will cause a tax increase now rather than a tax increase twenty years from now, and is political suicide.
Underpay during working years and promise an outsized pension to make up for it (since that passes the buck of having to fund it to some other sucker who's in office much later on) is a common pattern in the public sector. If you want to end it, you can simply pay competitive wages up-front (and no, pointing to a handful of outliers does not indicate that the average public-sector salary is competitive with private sector).
Government would be so much cheaper if they didn't pay the workers and instead just made them straight up slaves! Also, they need to find workers that don't need food or energy, since those cost money.
Citizens and their representatives aren't paying attention, don't care about pension issues, or don't understand them/aren't having the costs explained. Investors are buying bonds from the state either without performing due diligence or assuming that the state will get bailed out if they do run out of money.
"In fact, the size and amenities of the average middle-class family home have increased only modestly. The median owner-occupied home grew from 5.7 rooms in 1975 to 6.1 rooms in the late 1990s—an increase of less than half of a room in more than two decades. What was this half a room used for? Was it an “exercise room,” a “media room,” or any of the other exotic uses of space that critics have so widely mocked? Nope. The data show that most often that extra room was a second bathroom or a third bedroom.
The wealthy may be living in spacious new digs, but middle-class families are not. The proportion of families living in older homes has increased by nearly 50 percent over the past generation, leaving a growing number of homeowners grappling with deteriorating roofs, peeling paint, and old wiring. Today, nearly six out of ten families own a home that is more than 25 years old, and nearly a quarter own a home that is more than 50 years old."
Dowwie: Let's all just get paid more!
apsec112: Just paying everyone more when everyone buys things in inelastic markets like housing doesn't make anyone richer. This can be observed empirically with two-income households in 1975 vs today; people pay more today for the same thing they had in 1975.
alasdair_: Houses are bigger today (perhaps he meant to imply that actually we all are richer today because we're actually paying more for something better)
apsec112: A small number of houses today are bigger, but most people live in old houses that aren't any bigger; IOW we are paying more for the same as what we had in 1975.
blackguard: Old houses are ok too! (yes they are, but that's not germane...)
While some houses are built to last and worth saving (e.g. most houses you see still standing 150 years later) - most are definitely not. Trying to maintain a typical poorly constructed wood frame McMansion for 100 years probably doesn't make a lot of sense.
Plus I've lived in old crappy houses. Old wiring definitely sucks - you may be limited in a room you want to do something else in, and then realize you can't do much due to the plaster walls to fix it short of gutting the entire area. Most plumbing is only really rated at 20-30 years, but it's rare to ever see anyone replace it wholesale.
I've lived in crappy yet well maintained (but not updated) houses and it's not that much fun.
In relative terms it's effectively the same thing.
-> Public sector employees are generally paid too much for the value that they produce.
It's a function of power: their unions are the most powerful organizations on the planet.
They will pay themselves whatever they want.
http://www.fin.gov.on.ca/en/publications/salarydisclosure/ps...
Police Officers in places like Cornwall, Ontario, pretty far out there, where the average home price is probably just above $100K ... often earn well over $100K.
Nurses, Teachers, a plethora of questionable Directors (the Director for 'Clergy Services' the hospital earns a lot. How many staff? And how big is that responsibility?) all earning well north of $100K, esp. in rural areas where cost of living is low. Private sector salaries will be lower to reflect lower cost of living, but public sector wages are not.
Average wage in Canada is just above $40K.
See the groupings by trade:
http://www.livingin-canada.com/work-salaries-wages-canada.ht...
Note that 'public sector' employees are near the top.
The group earning more is 'utilities' - which in Canada are 'Crown Corporations' (or de-facto), meaning essentially public sector.
Where I live in Quebec, the 'best career path' for most people is 'Government', as it turns out, we have almost the lowest wages in North America, just ahead of the other Canadian Maritime provinces.
One of the most overlooked factors in government work is the 'riskless' nature of it. In finance, we learn that 'consistent payments' have quite a lot of value, which is why companies that pay very consistent dividends are worth more. That you have 'a zero chance of layoff, and a very low chance of being fired' is actually a benefit, and it's economically measurable. It's a premium and it's worth a lot.
The supplemental pension thing for bigshots is another matter. That's pure greed, and a city shouldn't be able to do such a thing if the are part of the state system.
I'm not saying that they should be paid a good wage plus money for their high risk occupation. It is just that pensions are pyramid schemes and not sustainable. And anyone who says just raises taxes to make them sustainable is proving that they aren't sustainable.
We need to get rid of pensions and switch to fixed contribution. If people run out of money, then use taxes to fund social programs to help them.
On the other hand, they can go long (rarely!) with great results, as they did with the self-dealing of politicians in the small city of Bell (in LA County) -- (http://www.latimes.com/local/la-watchdog-me-bell-sg-storygal...).
I'd call it Tribune more than just LA Times, and I'd note that the single example they use is generally an outlier. If they used an example from the median it'd be a lot harder to get people worked up.
One problem with government that is usually true is that it can grow, but it can't shrink. This applies to cost, workforce size, and benefits.
We're at a strange turning point right now. Pensions in the private sector have all but disappeared. Pensions in the public sector are alive and well because it doesn't need to be self sustaining, and by running huge deficits it can steal the money it needs today from future generations.
It's pretty obvious that cities and states should start eliminating pensions, but the beneficiaries of those same pensions are the people that need to do that. I'm not holding my breath for the right thing to happen here.
[1] Sorry if you're not in California. Your state/country may have similar open information.
>it can steal the money it needs today from future generations.
1) Future generations aren't buying our T bills. People are. Future generations will be receiving as well as paying interest.
2) Trying to make a moral case for stealing money from pensioners and giving it to the wealthy in the form of tax cuts is hard, but you gave it your best shot.
Right. Future generations are the ones paying the interest on them (and other government-issued debt).
> 2) Trying to make a moral case for stealing money from pensioners and giving it to the wealthy in the form of tax cuts is hard, but you tried your best.
I imagine you already know it, but I didn't say anything to this effect at all.
He did not say that, as you know. The usual argument in these cases is not to take away pensions from people who have earned them, but rather to cease offering this benefit going forward to new city employees.
Furthermore these pensions are gold plate: linked to inflation and guaranteed for life. We have 100s of thousands of middle tier public sector workers like teachers and council workers retiring every yesr with a guaranteed income stream that would cost millions if you were to buy the equivalent annuity.
How anyone thought this was sustainable or sensible blows my mind. It needs to stop.
you might think that the people responsible for providing the pensions would have taken the contributions that the workers made during their working life and invested that money for the future!
Unfortunately, that didn't happen. The UK government (who was the responsible party) made the decision to pay pensions out of future income rather than saving anything. It looked great on the balance sheet, since they could reduce taxes today and let somebody else look bad in the future.
Deciding on the breakdown of what percentage to allocate to each bucket and how many stocks from each category to use in your index would be an interesting debate to have though.
One is the number of years people live after retirement. Another is that pensions (due to their terms) have outpaced wage growth significantly so current contributors can't fund them. Finally, a pension relative to final salary is difficult to fund from a percentage of mostly from early-mid career wages.
In the UK, many public sector organizations have been privatized. Early privatizations often took the pension liabilities with them. As the employees who were members of such schemes leave the scene and current organizations must choose between meeting obligations and making a profit, I expect to see the companies look to duck out of obligations perhaps by packaging obligations into a spinoff company and then watching it go bankrupt.
A lot of retirees I know are pulling money out of these schemes using the new option to take the money as cash. They then put the money into buy to let as a kind of annuity on the basis that even if they'd get more money from the scheme in the long run, they aren't a position to take that kind of a risk. Hope they have insurance.
But I agree, "defined benefit" pensions are a thing of the past. There is a good BBC Radio Money Box show about it: http://www.bbc.co.uk/programmes/b0713p7s
I for one welcome our post-truth overlords...
[0] https://www.moneymarketing.co.uk/lib-dems-reveal-police-pens...
[1] https://www.moneymarketing.co.uk/issues/29-october-2015/case...
There is the problem. I've had a 8% pension in the programming sector since I was 20, my projections are for £300,000 by age 67 and £10,000 retirement income.
Teachers get 12 weeks off a year and to retire 7 years earlier on double the pension.
Personally, I'm retraining to be a teacher.
Pension calculators from the likes of legal and general show that you need vast pension contributions to match public sector employees. To match a teacher it recommended I made a 15% contribution, is any private sector company offering that?
http://www.legalandgeneral.com/calculators/contributionCalc-...
There are very, very few people retiring from the private sector with pension pots worth this. And those that are probably fall into the "fat cat 1% elite" so derided by the left.
CA basic rate is 7.5%, with many local add-ons (making San Jose 9% and San Leandro 10%, for two Bay Area examples)
'folly asked how Washington state raises revenue without income tax. 'redx00 and I answered. Do you disagree that sales (and real estate, and other taxes and fees other than income taxes) are how Washington state raises revenue?
Washington does levy sales tax on clothing, but apparently so do most states.
So the sales tax is a bit above median, but doesn't seem any more regressive than other states per se. And is lower than California's.
Property taxes have more to do with it, I suspect, especially given the mess in California with those.
Do you mean the tax rate on new properties? Or the effective rate actually collected, given the restrictions on how much property taxes can rise, etc? I thought one problem in California was that the latter figure, which is the more relevant one, was very low as a result of Prop 13.
The other problem in California is that it just seems to not spend money very well, as far as I can tell...
Mostly spend it on Social Security, Medicare, and Medicaid.
https://www.youtube.com/watch?v=XTlMLeEHjw8
The usual scheme is that you are not punished for not showing up to work, but are paid overtime for taking someone else's shift. As a result, swapping shifts with someone results in a 50% pay increase for both of you. Together with other scams, the result may be even greater.
There's an easy way around that. "All existing pension-holders will continue receiving benefits as defined. All new public employees will receive investment-based retirement plans funded during their employment." Then existing pension-holders have no reason to vote against it. This also seems far more ethical, as it retains the guarantees given to existing recipients.
The company I worked for phased out its guaranteed-minimum-benefit retirement program, in favor of its standard investment-based retirement program, by doing exactly this: limiting eligibility based on initial hire date.
I agree though - cancelling plum benefits while grandfathering existing recipients is the only politically tractable approach.
How about the approach that was used in the 80s ? 20% year-on-year inflation for a while with the government lying about it saying it's 5% ? That "reduces" liabilities by 15% per year.
Also, many state pensions aren't that great compared to California, etc. Employees only get 40 to 50 percent of their former salaries under a lot of pensions. I've never understood how California can do 80% pensions. The Federal pensions have some very high percentage too (not sure what it is).
States that don't steal from the future (New York, Wisconsin, Oregon, the dakotas, Idaho, Tennessee) fund their pensions. States like Illinois, California and Massachusetts do not.
Pensions aren't a problem, bad governance is. It's easy to say that it is "obvious". But the obvious solutions come with non-obvious blowback.
What do you do when a 50 year old fireman throws out his back dragging a hose and ends up on disability for 15 years?
What do you do when a burned out policeman shoots someone accidentally or has a heart attack and gets a fellow Officer killed.
Alternatively if there are too many physically demanding posts make it more like the armed forces and get rid of most people between the 10-20 year mark with a smaller pension and assistance with finding new work. 50 is a terrible time to push people into a new career.
Furthermore, this would only address current employees and not the prior employees who never paid into social security and have nothing but their local pension to fund their elder years.
If Johansen is unrepresentative of the average, it would be nice to give some stats on what the average actually is.
Instant facial recognition will present pensioners (& others) to everyone.
I can see where citizens charge them more or demand they pay for public services - or spend their money on the tax region from which it was sourced.
Legislation wont bring change but people will.
You might think this sounds reasonable, because historically equity markets do return something like 6-8% a year over the very long term, but the pension benefit is fixed and riskless in the sense that the city must always pay it out, so the investment should also be similarly risk free.
Otherwise, if investments fail to perform, then taxpayers are always left holding the bag, as we see every time a market downturn occurs. Heads I win, tails you lose...
It's also a lot easier to blame the people still around hoping to collect the pensions they were promised (and for which they took lower wages) than to blame others who screwed things up. I kind of feel that it's perfectly legitimate for legislatures to cut pensions as long as they also come to a retroactive agreement with the people affected to compensate them for the lowered pay that they took all those years ago, plus interest, and if it's going to be a lump sum cover any increased tax burden due to the size as well. Basically if you want to cut the pension, you have to retroactively fund the 401k or IRA that would make up for it.
Or of course they could work out a formula that attempts to cover part of the shortfall from the pensions of those who created the problem by chronically underfunding - legislators, governors, mayors, council members, superintendents, etc. for public pensions, the retired CEOs and board members and their estates for private pensions. I can't imagine that there'd be any screaming about that. It wouldn't make much difference in the amount of cuts, but it might be a deterrent to prevent similar issues in the future.
Consider Illinois, which has massive pension problems at the state and local levels. The state and towns/cities negotiated contracts that included pensions at a known level and had a pretty good idea of how much they needed to be funding in advance to cover those obligations, but instead of actually doing so they spent the money elsewhere on things more likely to get them reelected. It's like putting 1% in a 401k so you can spend the rest on parties every weekend, then screaming at retirement time that there's not enough in there to support you.
There are absolutely abuses and outliers - abuses where the senior decision makers implement policies that dramatically increase payouts, then retire to take advantage of those increases as I believe was the case in this article. Abuses like that happen in the corporate world as well, where they're often called "golden parachutes." Anyone else here remember reading about companies paying senior executives tens or hundreds of millions in compensation just to get rid of them?
There are also folks who've worked several different jobs, each of them with a pension that vests fully after 15 or 20 years, so once they actually retire they're able to collect separate full pensions from several different bodies or even occasionally from the same one - consider someone who was a police officer or fireman for 20 years, then "retired" and moved to another job in the same municipality. That person may well have a police/fire pension plus another civil service pension. I'm pretty sure Illinois and probably other places are working on reducing those with rules that limit the number of full pensions from one entity that people can get, but that won't make a huge difference.
What happens regularly is that you'll see stories like this that highlight the outliers - particularly outliers that were previously in the most senior positions - and use them as an argument for how the whole system is broken and needs to be scrapped. Expect to see those most often from the Tribune companies (multiple papers, headlined by the Chicago Tribune and LA Times) and Wall Street Journal (News Corp).
This. It's common in CA for posts like Chiefs of Police to "retire" as soon as they are fully vested and split for another jurisdiction and a fresh pension hunt.
I'm definitely not an 'anti government' type of person, but this kind of dysfunction is systematic.
They have the power to pay themselves a lot, and they do it, it's not even a public/private issue, it's just measure of power.
If progressives want to make actual progress, they need to tackle this issue.
1. Most people make less money than people such as government officials, research professors, and the like, because most people are unskilled laborers. So it always looks like the salaries that we read about are exceptionally generous.
2. There's a cultural belief that government workers are lazy and incompetent, and their jobs are "easy" in a physical sense compared to unskilled labor and the construction trades, so we assume they're overpaid.
The result is a natural political pressure to reduce salaries and benefits for public workers.