Public Sector Millionaires

$4 million.  That’s how much you need in your 401k plan to retire at the same annual retirement pay as a typical police officer, teacher, or transit worker manager in the northeast.

However you slice it, teachers (in the Northeast) and police officers and many government workers are millionaires.

I’m not talking about exceptions.  I’m talking about millionaires made up of every single police officer, teacher, transit worker at a manager level, and most bureaucrats in New York (assuming they work 25 years or more).

How is it that you can work 37 weeks a year, and work 25 years, retire at age 50 or 55, and have the equivalent of $4 million in your 401k?  Simple.  Have taxpayers pay for it on your behalf.  And I’m not talking about having the 1% paying for it.  I’m talking about the construction worker, the secretary, the Starbucks barista, the cashier at your local Stop and Shop.   Public sector workers are literally stealing from our citizenry, and shamefully do so with a clear conscience (it should be noted that these workers hide behind their unions, and so we complain about the “teacher’s union” rather than “teachers”.  But make no mistake, teachers fund and vote in that union and it is “teachers” who are perpetrating this).

Take another example, a long-time employee with an MBA working as a middle manager at, say, Pepsico.  Such a person probably makes the same amount as a 25 year high school gym teacher (ugh!), but the differences are huge.  The Pepsico person works 48 weeks a year, not 37 like the gym teacher.  The Pepsico worker sets aside $15,500 a year from her salary (with a small match from her employer) to fund her 401k, versus most public sector workers who don’t have to set aside a penny from their salary.  This employee is also subject to market fluctuations that can temporarily (or permanently) devastate their 401k balance while the public sector worker is guaranteed their payment regardless of market conditions.  And the Pepsico employee likely must work 45 years to retire, 15 more years than a local teacher, and 25 more than the local police officer.  Just think about these numbers and you go numb.

And every day presents a new challenge to that Pepsico employee, both stimulating challenges as well as challenges to their employment longevity.  The gym teacher, math teacher, and the government employee only need not commit a felony and their salary, benefits, and retirement pay are safe and sound (and even a felony often can’t stop the flow of pay and benefits to teachers in New York).

How did all this come about?  How does a police officer retire after 20 years (sometimes at age 41!), and receive $125,000 a year in retirement for the rest of his/her life, and never pay a dime for healthcare?

Well, it’s complicated, but it can be boiled down to 2 factors.  One is fat contracts committed to during flush times.  But the biggest factor is political blackmail and cronyism.  Public sector unions contribute huge sums of money to Democrat politicians, and these politicians pay them back with ridiculous retirement benefits and healthcare coverage (using taxpayer– said another way, using you– money).  These contributions have become indispensable for Democrat candidates, and without them they are doomed to lose elections, and so they accept them and the cycle continues.

This is a matter of right and wrong, and people like governors Scott Walker (R, Wisconsin), Chris Christie (R, New Jersey), and Andrew Cuomo (D, New York) are finally standing up to it.  And they are getting attacked in the most brutal ways by the public sector unions for doing so, and they had best not assume a dime of contributions from public sector unions.  And, worse yet, they can expect their opponents in the next election to be flush with union money in hopes of defeating those fighting for fairness.

It is critically important for our citizens to become aware of what is happening here and how much it is costing them.  I believe that if our citizenry was broadly informed on this subject, it would stop.  And maybe even public employees would become embarrassed when they look at the hard working citizens in their towns and know that they are taking their money and rewarding themselves wildly inequitably.

We need public sector workers to operate under the same terms that private sector citizens do.  Their number of working years, retirement pay, healthcare benefits, and job security should be similar to that of the citizens that fund their compensation.  Anything more or less is unfair and should not be tolerated.

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5 Responses to Public Sector Millionaires

  1. Steph says:

    Completely agree, but wonder what the solution is to work to improve public education while keeping public sector workers from being grossly overpaid. Teachers enjoy these over-the-top benefits in NY and CA, but those in the south and elsewhere in the US are probably underpaid. Here is the remuneration schedule in my district:

    http://www.cms.k12.nc.us/Jobs/Documents/2011-2012%20Teacher%20Schedules.pdf

    Teaching at a NC public school is essentially charity work. And I’m sure you can sympathize to the daily headaches teachers face battling red tape in a public sector bureaucracy — imagine being a hard-working, innovative new math teacher knowing you’re being paid significantly less than the tenured teacher down the hall popping in re-runs of the Colbert Report rather than preparing lectures. Teachers are paid based on how many years they have been around rather than any performance metric or the the subject matter (gym teacher vs. chemistry teacher with a phd? No difference).

    Other than those entering the prestigious Teach for America program (often as a stepping stone to a career other than teaching in a classroom), none of the graduating seniors I’m friends with at Duke were incentivized to bring their talents to education. So what do we do?

    • vofreason says:

      Stephanie,

      Thanks for your comments, and you ask a great question and raise several important issues worth examining. Most importantly, you ask what can be done about this. I believe the answer is a regional one because there are differences in the way each state works in regards to this, but I’ll answer for New York.

      We need to start with returning control of our school districts to our local communities. The teacher’s union in NY was able to lobby NY State government to ensure that their rich pay and benefits are protected at a state level. So while in my town we have watched our school taxes double over the last 8 years (mine, for a 2500 square foot house, increased from $8500/year to $17,250 over 8 years and are projected to double again to $35,000 in the next 5 years), our community has been completely helpless in stopping this growth. Teachers in our district, throughout this recession, have received an average 5.5% increase, COMPOUNDED, each year for the last 5 years. We can’t do anything to stop it. If teachers don’t agree to new contract terms, state law provides for the continuation of the previous contract terms, so teachers have no incentive to negotiate.

      Scott Walker has one key to the solution by revoking certain collective bargaining rights that allow unions to have a stranglehold on our politicians. If we inject more market forces into the process we can dramatically increase efficiency and fairness in the system. But you see the price Walker is paying– death threats, recall petitions, huge donations from public sector unions from all over the country to his opponents, etc. We need more brave politicians in both parties to stand up for what is right– self-funded pensions (with matching contributions on a portion from the tax base), merit pay systems, distinction between what a teacher teaches (e.g. gym vs. AP physics), etc. We must break the stranglehold of the unions.

      Another action would be to appeal to the teachers themselves. We should ask them, “why is it that you think you should have such protections, pay, and benefits, when the people who are funding them have no such things? We the taxpayers want to be fair to you and recognize the value of what you deliver to our community and to our children, but we want you to be reasonable. Can you, in good conscience, take such rich benefits from us and still feel good about yourselves? Why would you let a fantastic 28 year old teacher be laid off when a terrible 40 year old teacher is allowed to stay– and earn twice as much as the 28 year old to boot?” I find teachers non-responsive in such discussions, and in fact when you have the discussion with them and listen to their counter-arguments, generally you will walk away thinking “it is disturbing that someone who looks at the world that way is teaching my child”.

      This next suggestion may be the most important of all. We need to make people aware of what is happening and how rich these benefits are, and how out of sync they are with the pay and benefits in our society. I am constantly amazed that when I share information like I did in today’s post with other taxpayers, they had no idea what was happening. When they are informed, most of them are outraged. It is important, though, not to pull a President Obama and create a divisive, polarizing discussion around this and politicize it (and lie and distort). The facts speak for themselves, and the unfairness is crystal clear to see when the facts are exposed.

      I’d like to address your “teachers are doing charity work in North Carolina”. I surely don’t understand that market very well, but I looked at the pay scales you sent me. I plugged a few of the numbers into a “cost of living” calculator to see how much those salaries are worth in my area of NY. It turns out a teacher starting in NY at $77k would be the equivalent to a teacher starting at $33k in Charlotte, North Carolina. Not bad actually. And remember, this is for working 37 weeks a year, so pro-rated the earnings per days worked is 20-25% higher than it appears. And if they have similar benefits to the teachers in NY, you would add the $15,500 that private sectors have to put in their retirement accounts that NC teachers don’t have to (again, I don’t know if NC has the same rich retirement benefits as NY), which essentially raises their starting pay to around $45k in NC dollars, or $104k in NY dollars (again, for 37 weeks). This doesn’t count the healthcare benefits (again, if they are the same) which are worth an incremental $10k/year in retirement and perhaps $3k a year while working. (Just to illustrate the impact of cost of living by region on a personal level, my brother lives in Charlotte and has a house larger than mine, as nice or nicer than mine, that cost about 1/3 what my house costs and the taxes are probably 1/3 as well. He and his wife raised 2 daughters in that house and town, and they are at the best universities in the country and were able to extract tremendous educations from their public schools. So comparing salaries by region needs to take such differences into account).

      One last comment: Great teachers are extremely valuable and should be paid as such. We have some incredibly highly paid teachers in our school system ($160k+), and if I think about a couple of my kid’s best teachers, I think they are worth it– an AP physics teacher that was fantastic for instance. (While I was comfortable with his salary, the benefits and retirement were too much). Lousy teachers do incredible damage and should be given a fair chance to improve and if they don’t they should be fired. We need to get union money and union politics out of the picture, and start managing our schools and their employees in ways that are fair and equitable and justified by their results, and in ways that align with private sector taxpayer compensation.

      • Steph says:

        Very true. Regardless of cost of living though, the relative pay of public school teachers compared to other related fields in the same city — particularly within the education system itself — is almost insulting. Our high school Vice Principal made six figures and his job description essentially boiled down to “being in charge of lockers.”

        While you’re at it (re: appealing to teachers and other public sector workers), ask them why they disparage Romney/Bain Capital & despise the private equity industry so much while its what is generating their ridiculous pensions 😛

      • vofreason says:

        Please, don’t get the VOR started on this one. Our President has vilified “big insurance companies”, “big oil”, “large corporations”, “corporations”, “big banks”, “Wall Street”….and his wife tells kids everywhere she goes “don’t go into to the private sector, go into the ‘helping people’ business”. And I wonder, who in the heck is going to produce the tax dollars to support our ever-expanding government and everything they endorse? I can see being an ernest college kid thinking….”hmmmm…I don’t want to go work for a large corporation…Exxon? no way they are destroying our environment….Cigna health? Nope, that’s a ‘big insurance company’…..Pepsico? No, they are a ‘corporation’….I know, I’m going to go into a ‘sustainable’ business that helps people.

        This is what happens when we put elites who have never worked in the private sector in the White House. And when we let well-intentioned people with good will (mainly our college student population) become disconnected with the realities of life in America.

  2. Steph says:

    Just to be accurate, there is a (very small) difference in the phd level versus bachelors degree… By a negligible few thousand dollars. In 4 years at the #1 ranked public high school in Charlotte, I had only one teacher with anything higher than a bachelor’s degree.

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