It looks like the voter is going to hit on government employee wages. Every survey so far, shows the benefits and wages paid to the government workers far exceed what is paid in the private sector. The governor in Wisconsin didn’t get recalled and it looks like he’s going to cut some things a lot of people take as god given rights. The voters that tried to get him fired, have a payback coming.
When I was a kid, everyone joked around about government jobs not being real jobs. You started there, got experience and then moved on into the private sector if you wanted to earn some real money. Over the last 50 years, something changed and it was hardly noticeable, but it sounded like good common sense. “Let’s pay these government employees enough so they don’t quit and go to the private sector.” In hindsight, that doesn’t seem like a very smart thing.
The big thing to notice is that these wage surveys of the private sector, were based on pay for performance. If you were good, you got paid more. From there, each government job is linked to that private sector wage survey. Pay for performance drops out of the equation. Your government pay will keep up with the private sector whether you produce or not. And then there are the government benefits that are locked to the wage rate. So it’s not hard to see how government employees can retire with 100k per year pensions. It went from “the pays lousy, but they have good benefits,” to “The pays great and so are the benefits.”
This happened very slowly over 50 years. When times were good, no questions were asked. Now in today’s bad economy, there aren’t enough funds to pay for everything promised to the workers.
This gets worse if you look at retirement pension funds. At an 8 percent interest rate the funds of a pension fund double in 9 years. Well, rates are about ONE PERCENT. The rule of 72 here, means that the fund won’t double for 72 years. But most of the calculations of benefits were done when rates were 8 percent or higher. Hmmmmmm.
North Carolina has invested their retirement funds in some high performance stuff to get the return they needed for their retirees. Kind of make you wonder if they were Greek or Spanish Bonds?
We have come to a fork in the road. Pay all benefits or pay for services. Not an easy choice. And this is just the beginning! Bad choices are being made every day now to keep things as they once were, and that just isn't possible. I wonder, how long to we have to wait before some of these State financial insolvency problems start to hit the fan? There is no such thing as reserved seating in a lifeboat.
Copyright 2012 by Jim Brubaker