Public vs. Private Pension Plans

March/31/2019 10:12AM
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Send your kids to work in a pubic job. They get paid more, they can’t be fired, they show up for work less, they have less accountability in many (DMV), they have better health care plans, and last, but not least, they get a pension.

The first public pension plan in the USA was established in 1857 to provide income for New York City police officers injured in the line of duty. In 1866 it was extended to firemen and in 1878 the plan was extended to provide a lifetime income to police offers who had reached the age of 55 with at least 21 years of service. In 1875, the American Express Company established he first pension plan for private workers. From there both private and public plans grew in use. The private pension plans peaked in the early 1980’s but began to decline in 1984 as the defined contributions pans (401K) came into use.

Private plans peaked with 38% of workers covered by pensions. Finding accurate statistics seem difficult but in 2013 that was 13%, and today it looks to be in a 5-8% range. The private sector is moving out of the pension business.

Meanwhile, in the public sector that number is 97% coverage. Those employees contribute 1/10th less to their plans than private workers who still have plans and the pension payments ares 7 times higher.

When public employees unionized, which even FDR resisted, saying” you can’t bargain with yourself”, the plans became more generous than the tax revenue could cover. Proven by the state of Illinois which will go bankrupt because of excessive public employee pension payments.

Works like this. Democrats will give the public unions anything they request. The unions only donate to those Democrats. Most retired superintendents of schools from Illinois ae enjoying a $200K a year pension inflating at 3% a year. The Democrat Party also want more government employees so the growth in that sector increases every year.

Eventually, the same thing taking the state of Illinois into bankruptcy will do the same thing to other states. You take it from there. Blue states go first. Just like the blue city of Detroit and the blue territory of Puerto Rico.

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Comment (1)

  1. Doug Gordon says:

    My father worked his entire career for the VA, starting as a clerk typist and winding up a medical administrative director. I knew the numbers on government pensions made no sense from my father’s story. He had a medical disability retirement at age 53, drew pension equal to everything he ever paid into the system in the 17 months of retirement, spent 22 years in retirement, and this was before the give aways got really ridiculous like they are now.

    I’ve got a pension based on a mid-career salary from my first job that I had for 16 years that will never increase for inflation and is a diminishing percentage of the amount I need to live on, but at least I got something that’s about equivalent to $250,000 in retirement savings. I don’t get any retirement medical coverage; they eliminated that for me in my second year with that company & grandfathered older workers. No way as good as what my father had, but something the younger generations won’t even have.

    Spot on analysis as usual.

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