CEPR - Center for Economic and Policy Research


En Español

Em Português

Other Languages

Home Publications Blogs Beat the Press Chicago's Public Employees Do Not Get Social Security

Chicago's Public Employees Do Not Get Social Security

Wednesday, 07 August 2013 04:40

That little tidbit would have been useful information to include in an article on Chicago Mayor Rahm Emanuel's plans to cut public employee pensions. The piece reports that retired workers receive:

"average annual benefits ranging from about $34,000 for a general-services retiree to $78,000 for a former teacher with 30 years of service." 

These payments will in most cases be the vast majority of retirees' income since workers who spent their entire careers working for the city will not be receiving Social Security benefits. It also would have been worth noting that the actual payments (rather than schedules for long-term employees) average just over $37,000 a year under the city's main retirement fund.

Comments (13)Add Comment
More important details missed
written by Jennifer, August 07, 2013 8:41
Show me a mainstream news article that reminds people that most city (and most state) pensioners don't get Social Security and I will show you a unicorn. It's rarely mentioned, although the handful of politically-connected types that get several are usually mentioned.
What's most offensive in this article though is this:
Illinois, which has the most underfunded state pension system in the nation, controls Chicago’s benefit and funding levels.

Strictly speaking this is accurate, however it gives the misleading impression that the state has more control over the city pensions than is true, and tends to conflate the problems of the city and state pensions. Not knowing anything else, one might tend to blame Springfield for both.
What is true is that the state legislature gave the city, which asked, several "holidays" i.e. periods where the city did not have to pay into the fund. That was the plan this spring as well, so in the midst of a huge, messy fight over state pension payment Rahm apparently thought it wouldn't be a problem to ask for another "holiday" for the city pensions. When the state said no, all of the sudden we have a "crisis".

While both are underfunded, the largest problem, the state pension problem is more complex in part because of the political tensions of the governor, and the two state houses and interested parties. By comparison the city has been run by the mayor (one of two people for the past 20 years) and a city council that has never actually voted anything down in that time. If the current mayor or the previous mayor wanted to "solve" the problem, that is pay into the system, it's hard to imagine it couldn't be done. Instead both the current and previous mayor have put their energy into accumulating a giant slush fund via TIF districts. This money is used to subsidized corporations who don't need it to go downtown, which doesn't need it.
I don't know why that is pertinent to the article
written by Bill H, August 07, 2013 9:20
The article is about funding the pensions and about the amount of payments that will be required by cities. The amount receives by retirees is barely mentioned, if at all, and is not at issue.

If the discussion had been that pension payments to retirees was too high, or that it needed to be reduced, or that reducing payment to retirees was an otion, then the fact that they don't get Social Security would be pertinent to the discussion, but none of those things was discussed in the atrticle.

There is mention of doing to the Chicage workforce and pensioners precicely what the federal government is doing to the US workforce and pensioners: raising retirement age, freezing or reducing COLAs... But again, the fact that Chicago workers don't get Social security is irrelevant.

They didn't pay in to Social Security, and they are getting the pension plan that they did pay in to. At an average of $37,000 per year, it's a hell of a lot better plan than Social Security which averages something like $12,000 per year.
written by Eric377, August 07, 2013 9:50
Okay they do not get Social Security. Yes, $34,000 plus Social Security would be more comfortable, but how does that influence the soundness of their current pensions? In no way that I can figure out. Maybe Chicago financial managers screwed up for decades, but I do not recall that public employees were generally screaming to be included in Social Security so as to mitigate their retirement risks of the eggs-in-one-basket type.
written by Kat, August 07, 2013 10:10
I think your point is true, but for me it speaks to a need for a national pension system rather than a multitude of public pension systems. I have no idea if this is viable, but it does seem at least more politically viable. Whether a retirement plan is underfunded or not seems to be dependent on who controls the narrative. Hence, we get "empowering" 401ks with their 8% annual returns. Right.
so they earn about double or more the minimum wage...
written by pete, August 07, 2013 10:14
This is defining poverty up again, like somebody buying a $450,000 home needs assistance from the government. Note that in addition to the pension income, they have 100% leisure....this is not a wage for working...so essentially they earn 3X the minimum wage. But the fundamental question here is how a city spends scarce resources. There have been excellent discussions of this regarding Detroit. Keep the pensions up or have sufficient police,etc.? These kinds of frank discussions are why economics is known as the dismal science. Making choices when there is a budget constraint, rather than unconstrained consumption.
Workers did work for the pensions
written by Dean, August 07, 2013 10:39

These workers had contracts that gave them these pensions in compensation for their work. Perhaps everyone think it's okay to just void contracts, in which case Chicago would have much more money to play with since it could stop payments to all sorts of contractors -- it could even take back land it sold to people.

Most of us value a society where contracts have meaning -- but hey, we can try a different system.
It's the nature of capitalism
written by PeonInChief, August 07, 2013 11:18
Oh, Dean,

In a capitalist society a contract has meaning when poor people owe rich people, but when rich people owe poor people, not so much.
its the choices not the contracts, Low-rated comment [Show]
Pension Size
written by Bart, August 07, 2013 3:17

How much these retirees receive and whether they receive Social Security is an issue because public service employees are being scapegoated far and wide these days. Unions, especially those of teachers, are supposedly the cause of everything from illiteracy to bad breath.

$34K per year is not a lot of money.
It's not really a choice when you wave your hand and say there's not choice
written by AJ, August 07, 2013 3:18
I love how Pete just waves his hand and says that you can't raise taxes, everyone will leave. Well, if you just lower salaries, no one will work for the government. Leave the chicanery at the door. Not going to fly here.

It is definitely about choices, and you're not going to be able to just say one of those choices is not plausible and forever disregard it. This society has more than enough wealth than is necessary for a distribution that still allows for vast wealth differences but provides minimum standards of living for the less fortunate (and especially those who worked for a pension and deserve to see it paid, whether by the original counterparty or an "implicit insurer", such as the federal government, which occupies this role in many areas, such as disaster relief).

Funny how the choices you don't like "just can't happen" but of course, we can manage to do all the tough choices you do like.
written by Mrrunangun, August 07, 2013 8:56
The pols gave the union members promises that tomorrow's taxpayers, to whom retired pols would not be responsible, would pay their pensions. While said politicians deferred the contributions due said pensions' funds. And union leaders were given special side deals in separate pension funds that were fully funded like the funds for the legislators' pension fund. Some would suspect that those special deals bought the union leaders' acquiescence to deferral of the pension contributions rather than fighting to keep their members' pension funds adequately funded. The politicians took the money and gave deals that enriched themselves and their friends. The union members were stiffed. Perhaps with the bought collusion of their union leaders. Now the pensioned members want the current citizens to make good on old men's old promises. And they are, but it meant they had to close fifty schools in Chicago this year. The 500 murders and 5000 shootings in the town with the country's toughest gun laws testify to the operational inadequacy of the city government whose police department is 1000 officers under strength because we can't pay for the pensions and a full strength department. We are not going to tax the rich to make up the difference because the rich have the ability to enrich the political leaders and they do so.
AJ---bascally this is eating the seed corn....
written by pete, August 08, 2013 2:01
I am not making the choice, I am saying the taxpayers can make the choice, between, say, current public eductaion, police fireman, and the pension rate. I don't see why this is so hard to fathom. The idea of unconstrained consumption is appealing, just ask my 3 year old grandson, but not at all reality. Chicago, Detroit, etc. should be free to make these choices. The problem is if there is noone to pay the taxes to pay the pensions, what do you do then? And if you raise taxes or cut police, no doubt the real taxpayers will vamous.
Chidago's Pension Fix
written by JRP, August 08, 2013 9:36
Well, just impose a City of Chicago income tax to fix the problem. Maybe then the taxpayers will revolt and toss out the pols.

Write comment

(Only one link allowed per comment)

This content has been locked. You can no longer post any comments.


Support this blog, donate
Combined Federal Campaign #79613

About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.