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Home Publications Blogs Beat the Press Why Does the Public Hear: "tales of six-figure pensions and public employees comfortably retiring in their early 50s"?

Why Does the Public Hear: "tales of six-figure pensions and public employees comfortably retiring in their early 50s"?

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Thursday, 16 June 2011 05:24

The NYT told readers that many states are planning to increase employee contributions to their pensions. One of the reasons is that legislators are hearing:

"tales of six-figure pensions and public employees comfortably retiring in their early 50s."

This is true because the media have been repeating tales circulated by right-wing and business organizations who are attacking public sector workers and public sector unions. In fact, the vast majority of public sector workers do not retiree in their early 50s and do not enjoy especially generous benefits.

For example, in New York state, which is featured prominently in this article, the average benefit in 2010 paid by the state's main pension program was $18,300. Most of the workers who retiree in their early 50s are public safety employees like police and firefighters.

If the media had been doing a competent job reporting on this issue, legislators would be hearing tales of 70-year old retirees trying to get by on less than $20,000 a year. (Roughly 30 percent of public sector employees do not get Social Security.)

The article also includes the bizarre assertion that, "the era of generous compensation for public-sector employees is ending." In fact, after adjusting for education and experience the compensation for public employees is slightly less than for their private sector counterparts.

This article also cites a Pew Center study that refers to a public pension shortfall of more than $1 trillion. It would have been worth noting that this shortfall is equal to approximately 0.25 percent of projected GDP over the next 30 years (the time horizon for most pensions). It also would have been worth noting this study found that New York state's pension is 100 percent funded, contrary to the assertion cited in the article by New York Governor Andrew Cuomo that its pension is unsustainable. The article should have corrected Mr. Cuomo on this point.

Comments (14)Add Comment
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written by eric, June 16, 2011 6:47
Thank you for reading the NYT so I don't have to.
..., Low-rated comment [Show]
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written by Jennifer Reft, June 16, 2011 9:18
Why is the fact that many, and to my understanding all teachers here in Illinois, pubic workers are COMPLETELY DEPENDENT on their pensions for retirement, i.e. NO SOCIAL SECURITY if they have worked for public institutions their entire lives. This is something I rarely see mentioned, also as you suggest many state pensions are in good shape (including Wisconsin, although not Illinois) and what is going on is really a naked cash grab.
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written by Jeff Z, June 16, 2011 11:06
Jennifer Reft,

Mainly because it does not fit in with the narrative that most media outlets supply themselves to frame any story they run. In this case, the facts that you cite do not fit in with the "deficits bad, serious people reduce the deficit" framework. Thus, those ideas will get virtually no play. Instead, even guys like Dean Baker and Lawrence Mishel over at EPI are allowed to present these ideas, but only on the Op-Ed pages, where they have a different status and impact
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written by PeonInChief, June 16, 2011 11:11
If they were really worried about government spending, they would be looking at the spending that will be required to support seniors who worked at low-wage jobs in the private sector, have, maybe, $50K in their 401ks, and had to retire at 62 because they were laid off from their jobs.

One thing, too, that the press reports don't take into account. The retirement age really protects widows, rather than providing early retirement for most public sector workers. If an employee dies before reaching retirement age, the surviving spouse only gets what the employee paid in, with interest. But if the employee dies after reaching retirement age, death is treated as an immediate retirement. This means that the widow (usually) or widower gets the pension that the surviving spouse would have received if the employee had retired.
Propaganda is not as easy as it looks, Low-rated comment [Show]
Numbers are tricky
written by Jonathan Fischoff, June 16, 2011 2:44
The 18,000 seems like a low average for a fully vested worker. In SF if you work 5 years you can collect I think it is 11% of salary for the rest of you their life. If there is something similar in NY that might be influencing the number.

Part of the reason that people are surprised by six figure salaries is in many small towns that kinda of money can support a whole family. That is not true in a expensive city. If the story was government working making 60k in Athens GA no one would care, but that is like someone making 100k in SF.

Most people don't know much about salaries period. I don't know what would surprise people more, a 50 year old government working making 115,000 in SF or a 25 year old facebook engineer making 200k.
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written by Jay, June 16, 2011 5:09
"For example, in New York state, which is featured prominently in this article, the average benefit in 2010 paid by the state's main pension program was $18,300."

Come on. You know this is a pretty meaningless number. Not only will it be biased by 6-figure pensions, it is biased in the opposite direction by everyone that worked for the state for say 5 years and is collecting another pension from where they worked the other 30+ years of their life.
Public Won't Pay All This Money - Plus Retiree Health
written by JoblessInJersey, June 16, 2011 6:09
My guess would be that a 70 year old with an $18,000 pension is also getting Social Security.

If NY State's pension fund is sound, then good for them. But NJ's is in terrible shape, the retiree health plan is short many billions too. And there are many states that are billions behind on their payments.

I would advise any public worker under 60 to plan for a shortfall in what was promised. I just do not see future taxpayers -- almost none of whom will get a pension themselves -- being willing to pay enough taxes for government retirees to get 100% of what was promised. Let's face it, many of those pension promises were made to buy off the public service unions. The candidates depend on their help during election season and see these union members daily at their jobs.

A public without pension will not pay onerous taxes to pay for pensions (plus health care costs for retiree and -- often -- spouse too) for somebody else. Can you blame them?



From the Social Security website:
written by Deb Schultz, June 17, 2011 6:08
Do you work for an agency of a state or local government? Unlike workers in the private sector, not all state and local employees are covered by Social Security. Some are covered only by their public retirement pension program; some are covered by both public pensions and Social Security; and some are covered by Social Security only.

When it began, the Social Security program did not include any of these employees. Over the years, the law has changed. Most employees have Social Security protection because their states and the Social Security Administration entered into special agreements called “Section 218 agreements.” Others are covered by a federal law passed in July 1991 when Social Security was extended to state and local employees who were not covered by an agreement and were not members of their agency’s public pension system.

Except for workers specifically excluded by law, employees hired after March 31, 1986, also have Medicare ­protection. States may also obtain Medicare coverage for workers not covered for Social Security who have been continuously employed by the same state or local governmental employer since before April 1, 1986.

Those workers covered for Social Security under a Section 218 agreement are automatically covered for Medicare.

State and local government ­employees who are covered by Social Security and Medicare pay into these programs and have the same rights as private sector workers.
$18,300 or $39,808 ? Why such a difference?
written by AndrewDover, June 17, 2011 10:36
Calculate your own NY retirement at
https://nysosc9.osc.state.ny.us/product/benproj.nsf/BenProgFlashPage

A Tier 1 policeman with 20 years service could retire at 55 with 50% of pay.

Dean's reference:

•Average pension for Police and Fire Retirement System (PFRS) retirees in FY 2010: $39,808


only 1 way to determine compensation
written by fred, June 17, 2011 2:47
the free market. Is the government having a hard time recruiting people capable of doing the job? If so, raise compensation. If not, lower it. Note I used the term "capable", as opposed to having the right credentials. A Ph.D in Edumacation or Law Enforcement Theory doesn't mean the holder of that credential can teach or do competent police work. Needless to say, the edumacation lobby, mostly government workers by the way, tries to blur this distinction between paper credentials and ability to do the job.
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written by PeonInChief, June 19, 2011 7:26
Justasking--

The minimum retirement age for Social Security is not 67. Workers can retire at 62 (and almost half do), but they receive reduced benefits. The exception to that rule is that a widow or widower of an already-retired worker who dies can collect Social Security at 60.
I AM one of those evil gomminint early retirees in Illinois
written by Snuzyaluz, June 23, 2011 10:14
First, for the record, in Illinois, during my 28 years of service, I paid up to 9% of my wages directly into the pension fund--and yes, I did retire at 50 because I worked for the Department of Corrections, one of the few departments that could retire at 50 if you had at least 25 years of service(Corrections, Forensic mental health and certain titles in transportation--all were done due to the added stress of working environment). Also, because I retired when I did, I do not receive a "full" pension although I do receive enough to live on, frugally. Most retirees have to have at least 30 years of service and age 60 or 62.
I also paid the normal 6.67% into Social Security and had a 401K(for gov't. they're called 457B plans). This means that since I was working with the state, I have paid somewhere between 10 - 20%(including 457B) of my salary into retirement funding...how many of you who are screaming about pensions have done as much for your security? What? No hands? I'm not surprised. I have a "co-ordinated" pension and do receive Social Security when I reach at least the minimum age of 62. Teachers, firefighters, non-state police(I'm not sure about state police) all have "noncoordinated" pensions and do not receive Social Security. Most of them(any way the ones that I'm familiar with--Northern Illinois) paid somewhere between 10-15% of their salary into their pension, again, every paycheck. The average pension for a state employee in Illinois is $24,000(average salary is $52K, average age & seniority-69/25 years), the average pension for a judge in Illinois? Over 94,000(avg. salary - $147K, 63/17 years)! That's where the 6 figure pensions come in. A retired legislative representative brings in about $42K(average salary-$69, 60/14 years), and is fully covered after 20 years(unlike the state employee). These facts per IRSI (http://www.ctbaonline.org).
And on the idea that we should not be able to retire until 67 or later, how many of you think its safe to have police officers, firefighters, prison workers being front line at 67???? NOT too safe or secure.
On the other hand, although we hear about the "aging" population, there have been recent surveys that this is not the case for many people, women have been losing years--all women, most minority males, all males that have truly "middle" or "working class(trades)" careers. Where is that true life expectancy growing? Yep, the rich white guys--doctors, lawyers, banksters, politicians. IOW, if your job entails getting your hands dirty, you have less of a chance of living past 70.

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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.

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