By Ed Ring | “Without disputing the figures, Monique Morrissey, an economist with the Economic Policy Institute in Washington, D.C., said the findings are misleading because they do not compare specific classes of employees or account for differences in education levels and total hours worked.” — From California Is Golden State For Public Employees, by Michael Carroll, AMI Newswire, Jan. 31, 2017
Ms. Morrissey has a point, even though there was no intent to “mislead.” While our recent study “California’s Public Sector Compensation Trends,” found that full-time public sector workers in California earn pay and benefits that average at least twice as high as their counterparts in the private sector, going into comparisons by specific class of employee was beyond the scope of that particular study. But Ms. Morrissey is missing the forest for the trees.
First of all, as acknowledged in Carroll’s article where Morrissey is quoted, the study found that California’s public employees earn pay and benefits that average 39% higher than their public sector counterparts in the rest of the U.S. So especially in California, we conclude there are two classes of workers – public sector workers, whose 2015 pay and benefits averaged $139,691 for full-time work (if you properly fund their pensions), and private sector workers, who, very best case, earned pay and benefits that averaged $62,475.
Everybody knows that public sector workers have, on average, higher levels of education than private sector workers. Should this translate into average (and median, by the way) total earnings that are twice what all private sector workers receive? It challenges credulity.
Ms. Morrissey’s biography states “She is active in coalition efforts to reform our private retirement system to ensure an adequate, secure, and affordable retirement for all workers.” Bravo. That is a goal we share. And so in the spirit of aligning ourselves with practical, feasible, equitable objectives towards achieving that goal, Ms. Morrissey is invited to answer the following questions:
(1) Do you think what public sector pensions (ref. CalPERS, the largest) pay to California’s government retirees should be three to five times what Social Security offers private sector retirees?
(2) The average current retiree pension – not including retirement health benefits – for a state/local government worker with 30 years of service is $67,762 per year (click on any pension system to see average per former employer). There are 10 million Californians over the age of 55, 25% of the total population If all of them received a pension of $67,762 per year, that would cost $677 billion dollars, 32% of California’s aggregate personal income of $2.1 trillion. Do you think people who are retired should collect state-funded pensions worth more on average than the earnings of people who work? Do you think this is feasible?
(3) Defenders of unaltered state/local government pension benefits in California argue that pension benefits are primarily paid for via investment returns. But they claim investment returns can average 7.5% per year (4.5% after adjusting for inflation), “risk free.” Are YOU, Ms. Morrissey, willing to personally guarantee that MY retirement investments will earn this much? Because if you are, I’ll invest every penny I’ve got with you.
(4) Our “apples-to-apples” comparison of California’s new “Secure Choice” pension option for private citizens yielded the following comparisons: (a) Public sector: Teachers/Bureaucrats, 30 years work – pension is 75% of final salary. (b) Public sector: Public Safety, 30 years work – pension is 90% of final salary. (c) Private sector: “Secure Choice,” 30 years work – pension is 27.6% of final salary. Do you think this disparity is fair to private sector workers?
(5) Can you explain why public sector pensions are not subject to the same conservative funding and investing rules as private sector pensions are under ERISA?
(6) Do you support government programs that offer ALL American workers the SAME retirement benefits, subject to the SAME formulas and incentives, or not?
In reference to our recent CPC study, Ms. Morrissey is also on record as saying “There have been a lot of attacks on public-sector unions because their members have been a stalwart voting block for the Democratic Party, but that doesn’t mean they’re overpaid.” This remark suggests Ms. Morrissey thinks nonpartisan “attacks” on government unions aren’t justifiable and won’t happen. That is incorrect.
Government unions, unlike private sector unions, have the ability to negotiate for financially unsustainable pay and benefits because they control their bosses through campaign contributions, because their bosses are politicians instead of businesspeople, and because these pay and benefit packages are paid for through coercive taxes instead of via allocations of precarious profits.
Government unions have created two tiers of workers in this country. Government workers not only have unaffordable pay and retirement security, but their union leaders have an incentive to support government policies that destabilize and divide this nation, because that will create the need for even more unionized government workers. Government unions, intrinsically, are economically damaging and politically authoritarian.
“Unsustainable” means that sooner or later an end will come. When the money is gone, Morrissey and her gang will have a lot more questions to answer.
Ed Ring is the director of policy research for the California Policy Center.