I was talking to a buddy the other day and somehow the discussion of public employees came up, and we asked ourselves the same exact question at almost the same exact time:
Why in the hell are new public employees still able to join State backed defined benefit pension plans?
First and foremost, I am not talking about seasoned public employees since they were made promises by the government and those promises should be followed through with. We will just ignore the the fact that I thoroughly doubt the promises made to me by politicians about Social Security will ever be followed through with.
Why Are Public Defined Benefit Pensions in Trouble and Threatening State Budgets
It isn’t hard to find news stories about how a State’s pension system is underfunded and in dire need of additional funds. I believe (read: didn’t do any studies) that the problem is two fold all having to do with the actuarial assumptions:
- All those people that retired in the 80s were supposed to be way dead now, but are kicking into their 90s; and
- What actuary is going to assume zero percent growth in equities and record low bond rates for any extended period of time?
Again, I didn’t do any research into the subject as to “why are they failing” since I was much more interested in the question “why are they still around.”
Why are New Employees Allowed to Join Defined Benefit Pension Plans?
Other than the terrible argument of “I deserve it I work for the public” I can only think of one semi-logical argument; public employees are paid less so this offsets it, however, that is such a bullshit reason.
Currently there is a waiting list for police department in my area…that includes New York City! and the NYPD starting salary is about $46K. Less than $1,000 a week to put this guy in Harlem? HELL NO. But for some reason even the NYPD has a waiting list! My brother is in the FDNY and his wife is a teacher in NYC and both have said that currently it is almost impossible to get hired by either place.
So even if they took away the pension system for NEW cops, firemen and teachers maybe half would drop off, so you just have a SMALLER WAITING LIST! Hell use the savings to pay these brave men and women more.
It should be mentioned that most public employees have a 401(k) equivalent (usually a 403(b) or a 457) so just start matching contributions like most of the country. This doesn’t even take into account the health and insurance benefits some public employees get (as they should especially police and fire). I doubt any public employee pays $10,000/yr for health insurance (like me).
In the past I have taken some heat for my post about teachers, so I want to be clear that I am talking about all public employees that receive a pension – cops, firemen, court officials, judges, etc. Before I get nasty comments I understand that not all public employees receive a pension, but the question is still relevant are you for or against these types of pensions backed by your tax dollars?
We live in a free society if removing pensions for new employees of the public sector causes that much of a drop in employment what is the worst thing that happens? YOU BRING IT BACK.
Can anyone give me a good reason why new public employees should be able to participate in a pension plan backed by my tax dollars?