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.
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.
All defined benefit pensions should be converted to defined contribution at current value.
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.
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.
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.
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.)
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.
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.)
A Bad paper is doing bad statistics
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.
All in all it isn't a surprising number at all.
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.
No, we can't. We could agree that private sector pay increases and real wages have stagnated and private sector workers are underpaid.
Except the analysis methodology is bunk and either or any conclusion is hogwash.
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.
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.
http://www.cbpp.org/cms/index.cfm?fa=view&id=3036
tl;dr version: http://www.cbpp.org/images/cms//12-16-09bud-rev6-28-10-f1.jp...
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.
