Once again we have an example of too much of a good thing in the public sector. I think it’s fair to say that public employees should receive competitive compensation and good, but affordable employee benefit programs. That includes health care and retirement benefits. In the private sector obtaining and retaining those things is a negotiating process where there is trade-off between cash and benefits and where the employer (and many responsible unions) consider the immediate and long-term impact on the employer. I negotiated such agreements for many years.
Sadly, in the public sector there is no motivation to consider such things. On one side you have politicians seeking to please unions and on the other union leaders seeking anything and everything they can get regardless of the consequences. The problem is that there are consequences and in many cases the negative impact is on the worker. Consider the following example from Providence, RI. No responsible party in a negotiation would agree to an annual 6% pension cost of living increase and yes, I bet the actuaries did do the math but it was ignored. The massive liabilities created by such a provision are so obvious it is laughable. Think about it, that 6% is probably double the normal wage increase for an active worker.
This type of situation occurs over and over and has for years. It is largely because of the great recession that the incestuous relationship between the parties in public worker labor negotiations has come to light. In the long run neither workers nor taxpayers benefit.
McLaughlin, 75, is the highest paid of Providence’s 3,000 retired workers, collecting a $196,813 pension this year, the result of yearly 6 percent cost-of-living increases the city once bestowed on firefighters and police. Lawmakers, facing a $1 billion deficit and squeezed for cash, ended the automatic raises and capped annual payouts. Now retirees such as Gillie, as he is known, won’t see their pay outs double every 12 years.
“No one ever did the math on this,” Paul Doughty, head of the firefighters union, said in an interview in his office above the bar at the Firefighters Memorial Hall in Providence. “I don’t think anyone had any idea that if Gillie lived to 100, he’d be making $700,000.”
And then there is the news from California where true to form politicians align not with the citizens and taxpayers in general, but with the public unions.
Related articles
- Judge upholds suspension of pension increases for N.J. public employees (nj.com)
- Ailing Public Pension Funds Threaten Future for Retirees, Workers (aarp.org)
- Analysis: Bad math on city pensions (wpri.com)
- Alward overhauls public pension system (cbc.ca)
QUINNSCOMMENTARY 