Time to End Public Sector Indentured Servitude
Public service is one of the few places where one still can find a defined benefit pot of gold at the end of their employment. Although defined benefit pensions are all but extinct in the private sector, most government workers in Pennsylvania are still stuck in these retirement plans.
Some government pensions reach as high as 70 percent of recorded earnings, padded with overtime to inflate the salaries on which pension payments will be based. Then there are the generous legislators’ pensions – such as Sen. Bob Mellow’s, who is projected to take home more than $300,000 per year for his decades of "public service."
Once upon a time, government pensions were legitimately seen as leveraging the compromise between lower public service wages and what one might earn working in the private sector. In many cases, folks graduated from college with teaching degrees in the 1960s or 1970s only to end up working business careers when they found that teaching simply didn’t pay the bills.
The same was true for my chosen career of law enforcement. The practice of restaurants and businesses giving police officers "freebie" meals or discounts originated from business community awareness that those making up the "thin blue line" between the criminal element and law-abiding society were poorly paid. "Lunch on the house" was a way for business owners to help close the salary gap for those willing to protect and serve the public from the bad guys.
The economic rationale of the public service compromise was based largely on the promise of the defined benefit pension. Young teachers and police academy cadets such as myself were often told that we’d never make a lot of money in public service jobs, but we would enjoy the benefits of job security and good solid pensions at the end of our career.
Today, the "public service compromise" rationale is no longer valid, because, frankly, most government employees are much better compensated than their private sector counterparts.
While the median annual combined household income in Pennsylvania is about $49,000, the average annual salary for an individual teacher in Pennsylvania is about $54,000. Salaries for police officers are comparable, with many in either profession approaching or surpassing six figures in combined salary and benefits.
And while salary, benefits and pensions of public servants have steadily increased in recent decades, the opposite has happened in the private sector. Most notable in the private sector is the virtual extinction of defined benefit pensions. Yet the possible elimination of defined benefit pensions is characterized as a threat to public sector workers.
Honest analysis suggests that moving away from defined benefit pensions is a positive breakthrough for the public sector workforce. Presently, public sector employees must systematically contribute a percentage of their weekly salaries to the pension fund they will be drawing on as a retiree. The fund invests that money and builds capital, fortifying its solvency. If government employees make it across the finish line, they get their pension payments as promised.
But if they decide to leave their government job, even to work for another government agency, they get the only sum total of their contributions back, with no interest, no accumulated growth, and no return on their investment for the time that the pension fund had possession of their money.
In effect, government employees working for defined benefit pensions are really little more than lifetime indentured servants, trading the potential for what they might achieve in life for a ball-and-chain commitment to a particular government career, with a specific government entity.
Many, especially teachers and law enforcement officers, simply burn out, but remain stuck in careers they no longer desire, just waiting for the day they start collecting their defined benefit pension.
The choice before them is simple: Stay slaves to the dangling defined benefit pension carrot, or leave that government job, getting nothing in return but the sum total of the cold hard cash you provided as a no-interest loan to the government entity for which you work.
The reality is that the real world market benefits of the defined contribution system, where one builds a portable retirement nest egg that they own and can take with them wherever they work, is a much better deal than the promise of a defined benefit pension. The system we have now is not really a pot of gold at the end of that rainbow, but, rather, 30 shekels of silver in exchange for one’s employment freedom.
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Donald Hoffman is a municipal police sergeant and a freelance writer living in Fountain Hill.