Any kid taking a government job today will be “buying at the top.”
This isn’t the first domino because that implies some causality. But it is the first popcorn kernel to pop.
As our fiscal problems deepen, this public-sector pension bomb is going to become a huge issue. Look at this from America’s Newspaper of Record:
A Yonkers teacher with a master’s degree and some additional coursework could expect a final average salary just over $110,000 after 37 years worked. That translates into an annual pension of $78,255 — exempt from state and local income tax — with a present value of more than $1.5 million, assuming retirement at 59. Police and firefighters, famously, get to retire earlier with even more generous benefits.
These calculations don’t include the value of retiree health-care benefits. While health benefits for retirees are nearly unheard of in the private sector, New York public employees may keep their same health insurance in retirement nearly for free — or absolutely for free in many cases, as workers can use accumulated sick time to pay their share of the premiums. This is a benefit worth approximately $14,000 per year for family coverage. And the benefit doesn’t stop at 65. Once retirees become eligible for Medicare, taxpayers generously pick up their Medicare Part B premiums and pay for high-quality Medigap coverage.
These goodies all have cost-of-living adjustments built in, so inflation won’t reduce them. They are written into law, so they may even survive public-sector bankruptcy — a problematic notion in itself. They are un-changeable and un-killable.
The Alabama town in that New York Times story just stopped paying; a state or major city facing the same problem would be asking for a bailout from the feds. Considering the political and social cost of Philadelphia or Illinois going belly up, they’d likely get it.
As private-sector Joe stumbles off into poverty-stricken retirement while public-sector Jane next door starts drawing her $78,000 tax-free benefit-stuffed inflation-proofed pension, there will be some ugly conflict.
I’m still betting on Jane. So get that government job: just make sure your employer is too big to fail.