Monday, June 11, 2012

Belt Tightening, Pay Cuts For Everyone, Retirees Included

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


Anonymous said...

I know a Navy Reservist who works for the State of Florida as an appraiser of private land when the state wants to purchase it for public use. These state employee "appraisers" come in when the owner refuses to accept the initial offer (normally low balled) by the state.

The quota for each appraiser per month is set at 2/month, for which there are about 8 officials assigned to this office to perform the job. The Reservist I know would perform at least 18-20 of these appraisals per month while the rest of his counterparts would stick to the state's quota.

It was told to me by this Reservist who works for the state that the work load could easily be performed by 2-3 folks. Take this one scenario and multiply it by 22.4 million state and federal employees and the real problem surfaces.

My point is this. Its not just that federal and state government employees are overpaid and have excessive retirement/health plans... they are grossly under worked from an efficiency bar set so low that even when "Special Olympic" participants grow up they too can secure a job.


Anonymous said...

So you know one person and can somehow determine that 22+ million people are not working. I work for government and I worked hard this week. I'm not buying in to your logic. Next caller please.

Jim in San Marcos said...

Hi Anon 5:35

I side with ATP. I worked for the Colorado Highway Department for 7 years. I did twice the work of the others and all that ever got pointed out to me was that I made twice as many mistakes.

Private subcontractors eventually replaced most of the state highway crews, for half of what they were paying us.

With government layoffs and closures, the work load of the remaining government workers has increased. So it is definitely not a black or white issue.

I see no reason to link government wages to what the private sector pays. In the past, a low paying government job gave you the experience to get a better civilian job. It was this trade off that gave government more bang for the buck. Under the present system, its the tax payer that gets "banged" by the lockstep matching wage scale.

The issue being overlooked here is what happens to the government employees in the system that have been promised the moon and now the State can't deliver?

Anonymous said...

@ Anon 5:35,

So... in your mind you "worked hard this week," and this somehow makes up for the first 5 months of the year? You definitely sound like the typical government employee mentioned above.

You could have at least made it sound a bit better by saying you worked hard the last couple weeks. I've also noted that you did not dispute my claim of being overpaid with excessive retirement/health benefits.

How about filling in a few gaps by giving a few specifics like what type of work you do, how many other employees are in your work place doing exactly the same job, how many hours you work per week, salary range and paid benefits/vacation time?


Anonymous said...

Your implication that I did not work hard earlier in the year makes communicating with you a mute point. Your mind is already made up.

From a differentt perspective, I think we can all agree that the American standard of living is going down. If the public sector does not go down as hard and as fast, people start complaining. It is like a family complaining because their neighbor has a better cardboard box to live in.

What we need is less complaining and more doing. The entire younger generation is plugged into their cell phones etc. Where is our innovation going to come from ?

(written from an I-pod please excuse the spelling)

Jim in San Marcos said...

Hi Anon 6:05

I agree with you. To rephrase your thoughts, "Lets not try to figure out who's to blame for this mess, lets figure out how to fix it." -- of course in an election year, things don't work quite that way.