Speaking of seething, here in Illinois we’re getting deluged by television spots from public employees’ unions trying to gin up sympathy for their members. Here’s one of them if you’re interested. I won’t embed it.
I think that public employees have a good argument in favor of their pension plans: they took deferred income rather than increasing past wages. But the argument that’s being made in the ad, “we paid for it”, is just plain stupid.
Let’s go to the back of the envelope. A Chicago police officer has 9% of his or her pay deducted for pensions and can retire at age 55 at (I think) 75% of terminal pay. My quick calculation suggests that 30 years of contribution pays for about four years of pension. How long do you think that 55 year old police officer will live? Ten years? Twenty? Thirty? More?
But the money could be invested (I hear somebody say). Two points. First, that’s making the Heritage Foundation’s argument for it: you’re implicitly arguing that people should be investing their own money rather than depending on a company-paid pension. Second, how much do you think can be earned with conservative investments? I don’t think a great deal but let’s say you’re able to triple your money.
That pays for twelve years. The 55 year old police officer is now 67. Now what?
The numbers just don’t add up. Public employees are receiving much, much more in benefits than they ever had deducted from their paychecks.
I’ve got a freind whose father-in-law is a retired cop, his son just retired as a cop, and they are musing whether the eldest will live long enough to see his grandson retire from the police force. We’re basially paying three salaries to get one cop.
News out here is of lifeguard top staff earning around $100k and retiring at 50 with 90% salary. Making some waves.
At lunch today, I heard of a brother who worked a short while for the state a long time ago. Since the pension was going to be small, he cashed out when he went to the private sector and received $5,000. Approaching 60, he called to see if he could buy back in: yes, but he would have to pay $8,000. He took it, figuring that since he will receive about $3,000 a year, he’ll be ahead in a few years.
“Making some waves.”
Heh. Good one.