[quote=EconProf]A couple of observations:
1. Pensions are nothing but deferred compensation. The employee is simply getting the promise of X dollars during retirement as well as regular pay during their working years. A worker’s total compensation is their pay, fringe benefits, pension (if any). (Some jobs also have nonmonetary rewards such as prestige, variety, working with interesting or glamorous people, etc., and some jobs have just the opposite of these benefits. Pay and benefits can be higher or lower to offset these nonmonetary factors.)
Our posts are throwing out anecdotal examples from our own experience that don’t really prove anything. However some clarity is achieved when posters bring up death rates by occupation and the full lifetime cost of public pensions.
I’d like to add a market test to the debate. The total compensation of private sector employees is roughly determined by supply and demand. Job seekers are the suppliers of labor and employers are the demanders. Of course there is no exact price point for each occupation, but a range that can broadly move up or down with changes in supply and demand. Employers are not stupid enough (usually) to overpay for their next hire if it is way over market. Job seekers are also not going to take lower than market total compensation if they know, or believe, that they can do better.
This healthy private sector competition establishes average wage levels. What about in the public sector? When public sector unions negotiate against politicians, there is less pushback from the taxpayer’s representatives because it is not their money. Further, they have less incentive to curb excessive pension benefits because that cost will be borne years or decades in the future. The unions and their workers can thus greatly enhance the total compensation of their jobs by taking it later in life. They are more patient, and maybe smarter, than the politicians across the table.
2. Another market observation to throw light on whether government employees are overpaid or underpaid. First, what is the quit rate of, for example, firefighters and police? Second, how many people line up to apply for these jobs on the rare occassions when openings occur? Answer those two questions and you will get a better idea of whether total compensation is too low or too high as compared to the private sector.[/quote]
