Matt Taibbi’s latest article- Wall Street Hedge Funds Are Looting the Pension Funds of Public Workers

[CA renter]

[quote=livinincali][quote=CA renter]
Public employers offer these benefits in order to keep their recruiting and training costs down because of the lower employee turnover, and they also attract the best possible candidates for these positions. Contrary to the myths pushed by the Privatization Movement, most government agencies perform very efficiently and have extremely high-quality employees. With the millions of public employees in this country, you’re bound to get a few bad apples, but for the most part, they are very well-trained, responsible, trustworthy employees. And since many of these employees have positions that require high levels of trust and responsibility, it’s incredibly important to hire and retain the best candidates possible.
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So public sector employees are better than their private sector counter parts.

[quote=CA renter]
DIY investing might work well for Piggs and other nerds who spend an inordinate amount of time analyzing economic and various market trends. This is a small group of fortunate people who are inclined to have above-average IQs, financial acumen, and investment returns. Even here, we know that many of us will under-perform at one point or another.
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Yet they aren’t smart enough to manage their own funds.

So they deserve better pay because they are better. They deserve better benefits because they are superior to their private sector counter parts. When their fund managers and leaders make bad benefit and investment decisions their inferior counter parts can pay more taxes to make up the difference. Sounds fair to me.[/quote]

Read my post above — I’ve worked in both the public and private sectors, and can say for that, in general, the public sector employees are harder working, more dedicated, and more trustworthy than their private sector counterparts. That’s not to say that all private sector employees are bad, and all public sector employees are good (not by a long shot); there are variations across the board, with both excellent and poor employees in both. But from what I’ve seen, the turnover in the private sector tends to be very high relative to the public sector, and private sector employees seem to spend a lot of time (on the clock) looking for new jobs or getting distracted by personal issues. Many of them just don’t seem to take their jobs as seriously as many public sector employees do. I saw far less of this in the public sector. Just personal observations, and others I know who’ve worked in both public/private sectors have noted the same thing.

If you look at the requirements for employment for similar positions, you’ll see that the public sector tends to have higher qualification standards WRT education and experience. Additionally, many public employers require candidates to pass thorough background checks and a series aptitude and psychology tests in order to be considered for a position. I’ve not seen anything like it in the private sector (for similar positions) outside of positions that work with sensitive government information.

Yes, the government needs to hire the best possible candidates because govt entities are seen as deep pockets; they cannot risk hiring someone who will be a liability to them. They compete with private sector companies for employees so they have to offer something that will attract and keep the best employees. In the public sector, the value of training and experience on the job often trumps other variables, so keeping a lid on recruiting and training costs (which are VERY high) is extremely important to public agencies as well.

And let’s get over the meme of “taxpayers” being different from public sector employees. Govt employees pay every bit as much in taxes, if not more because of their W-2 status, as their private sector counterparts.

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Public vs. private sector efficiency:

In the U.K. (nationalized transportation/prison systems/healthcare compared to private markets in the U.S.)…

“Private sector dynamism versus public sector inefficiency has been the dominant political narrative of the last few decades. It has supplied the excuse for repeated, one-directional upheaval in many of the services that we rely on, and which are essential to our quality of life. At best, evidence of private sector superiority is lacking. At worst, such lazy assumptions can cost lives as well as money.”

http://www.neweconomics.org/blog/entry/mythbusters-the-private-sector-is-more-efficient-than-the-public-sector

And more here:

http://www.theguardian.com/commentisfree/2013/apr/25/private-sector-superiority-mythbuster

and here:

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And I’m not just advocating for DB pensions for public sector workers. I think all employees should have DB pensions of some sort. As a matter of fact, most do, though it’s an insurance program rather than a deferred compensation/DB pension program. It’s called Social Security, and it’s essentially the same as DB pensions for public workers, but employees/employers pay in more with most DB plans, and the benefits are higher because it is part of their compensation package as opposed to being insurance against abject poverty in old age or when one is disabled. Many public employees with DB pensions do NOT get Social Security (most that I’m aware of, but it varies from one public employer to another), and public employees do not get matching contributions to DC plans or other retirement plans. Their DB pensions are all they get if they don’t qualify for SS via private sector employment (and even that benefit will likely be reduced if they receive DB benefits).

[livinincali]

[quote=CA renter] But from what I’ve seen, the turnover in the private sector tends to be very high relative to the public sector, and private sector employees seem to spend a lot of time (on the clock) looking for new jobs or getting distracted by personal issues.
[/quote]

Well of course turnover is higher in the private sector. There’s no Defined Benefit retirement plan locking the employee to the company if he gets bored or frustrated with the company and chooses to leave. Anybody with an IQ higher than 10 isn’t going to leave a defined benefit pension once they’re 5-10 years into employment. There’s an exponential ramp in annual payments the further you get into a plan because you tend to get an increase due to another year of service and many public employees have set pay increases along the same years of service principal. At the job for 10 years and now you’re a job title III instead of a job title II that comes with an automatic raise.

[quote]
If you look at the requirements for employment for similar positions, you’ll see that the public sector tends to have higher qualification standards WRT education and experience. Additionally, many public employers require candidates to pass thorough background checks and a series aptitude and psychology tests in order to be considered for a position. I’ve not seen anything like it in the private sector (for similar positions) outside of positions that work with sensitive government information.
[/quote]

I agree that public employment tends to have greater education standards but I don’t know that it means those are better employees. Is a person with a Masters from National better than a person with a BS from UCSD. In government employment it is but it’s not necessarily true in the private sector.

[quote]
Yes, the government needs to hire the best possible candidates because govt entities are seen as deep pockets; they cannot risk hiring someone who will be a liability to them. They compete with private sector companies for employees so they have to offer something that will attract and keep the best employees. In the public sector, the value of training and experience on the job often trumps other variables, so keeping a lid on recruiting and training costs (which are VERY high) is extremely important to public agencies as well.
[/quote]

Do you have to offer a defined benefit plan to be better than the private sector. Why not just offer a 10% gross salary defined contribution. That’s already far better than what the private sector is offering. And it’s pretty close to the additional cost that offering a defined benefit plan is.

[quote]
And I’m not just advocating for DB pensions for public sector workers. I think all employees should have DB pensions of some sort.
[/quote]

The country is already struggling with how they are going be able to tax enough to maintain social security. Social security is funded by taking 13.4% of your gross salary and for most people social security is going to pay up to 40% of their final year of pay (for the people here it will be much less) while many public sector defined pensions plans pay north of 60% of their final year of pay. It just isn’t likely to work from a mathematical standpoint. You’d probably have to contribute double the social security contribution rate to have a stable pension that’s as generous as the public sector and the public sector employees aren’t contributing that much. They are all betting on asset price inflation to make it work and/or tax payer backstops.

[CA renter]

Livin’,

I’ve already addressed why they want to “lock in” those employees by having DB plans instead of DC plans in my previous post:

“They compete with private sector companies for employees so they have to offer something that will attract and keep the best employees. In the public sector, the value of training and experience on the job often trumps other variables, so keeping a lid on recruiting and training costs (which are VERY high) is extremely important to public agencies as well.“

As for Social Security having benefits that are comparable to public pensions, we would have to change the terms of the program. As of now, it’s an insurance program, and it’s meant to simply supplement other retirement plans. Yes, we would have to increase contributions (FWIW, public employees contribute about 50% more to their pension plans than private employees do to SS), and I would argue that we need to lift the cap on income levels subject to SS taxes, even if we don’t increase benefits above that (yes, that dreaded “socialism” again). It’s an easy fix, but not necessarily politically palatable, as with most problems in this country.

Still, while everyone cries that they don’t have DB benefits plans (because that’s what they’ve been told to believe by the Privatization Movement and those in the financial industry who want to get their hands on all of the SS and DB plan funds), they really do.

[Author]

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