A Little Poison for the System
Kevin Drum is talking public employee pensions:
I should confess here that I’m not a big fan of public employee unions. On my own personal scale of sympathy, I strongly support private sector service unions, I moderately support private sector industrial unions, and I only barely support public sector unions. So no one should expect me to go to the mattresses for public sector benefits. Still, Jon is right: one of the favorite tactics of conservatives is to set the middle class at war with itself. It’s sort of the mirror image of corporate compensation committees, which keep CEO pay forever rising because no one wants their CEO to be paid less than average. With middle-income workers, by contrast, the CEO class exploits jealousy toward better compensated unionized workers in order to ratchet things down. The grocery clerks don’t want to accept an insurance copay? Well, I have an insurance copay, so why shouldn’t they? The truckers don’t want to switch their pensions to a 401(k)? Well, I have a 401(k), so why shouldn’t they? Etc., etc., ever more disheartening etc.
This is a tactic that works pretty well. As union density has shriveled in the private sector, workers don’t really aspire anymore to getting a “good union job,” as they often did in the past. It’s not even on their radar. Instead, they see a small and privileged group of workers who are better off than them even though they don’t work any harder, and instead of wondering why their own pay and benefits are so low, they simply become resentful of this coddled class.
Private sector union density has gotten so low that it’s not clear how much they can do about this attitude — and the odds of increasing union density more than a point or two seem cosmically slim. So now it’s going to be a war of taxpayers against unionized public employees. It won’t be hard, especially in lousy economic times, to convince envious clerks and factory workers that these guys need to be brought down a peg or two. It’s just human nature. But wouldn’t it be better if all these envious clerks and factory workers were instead asking why their pay and benefits haven’t keep up with overall economic growth — which, after all, is all that public sector workers have accomplished? I don’t know what the future of unions is in America, but for now they’re really the only ones who are asking that question and putting some muscle behind it. Until someone else starts doing a better job of it, we still need them.
Thoughts in response:
1) Even if we set aside the whole jealousy argument, and ignore every member of “the CEO class” that makes it (and surely that is a very small class), the need to reduce public employee pensions is apparent on the most clearheaded, unemotional analysis. Those of us in Los Angeles, for example, face the prospect of pension costs consuming a third of the municipal budget by 2015 if nothing is done. Doing something need not be about class warfare.
2) It strikes me as strange to say that it would be better “if all these envious clerks and factory workers were instead asking why their pay and benefits haven’t kept up with overall economic growth — which, after all, is all that public sector workers have accomplished?” The pension deals that most anger the public involve folks who got to retire at age 50, earn 90 percent of their peak salary until death, and determine that peak salary based on gaming the system in a way clearly contrary to the spirit of pension laws that only passed because unions bribed shortsighted and irresponsible politicians operating on misleading actuarial advice.
Imagine for a moment that every worker in California saw their salary rise along with economic growth. Correct me if I’m wrong, but my impression is that the vast majority of these workers would remain unable to retire at age 50, that upon their retirement they’d receive significantly less than 90 percent of their salary in pension payouts, and that the benchmark that determined their pension in the private sector wouldn’t be wildly inflated.
3) Another reason for resentment toward this coddled class is that those of us without fancy union pensions aren’t just being asked to watch as retiring public employees are lavishly compensated from public coffers — we’re being asked to pay more ourselves in taxes to sustain their extravagant benefits, even as our real earnings drop. “Pew estimated a $1 trillion gap as of fiscal 2008 between what states had promised workers in the way of retiree pension, health care and other benefits and the money they currently had to pay for it all,” Ron Lieber reports in The New York Times. “And some economists say that Pew is too conservative and the problem is two or three times as large.”
Do read that NY Times piece. Its assessment of this issue is very close to my own. On one hand, labor contracts should be respected. But in the private sector, retirement deals are checked by the solvency of the company or fund in question, and managers who have an incentive to limit compensation to what is affordable. In contrast, the only check in the public sector is the will of the people imperfectly rendered through their elective representatives. Sometimes that results in insanely generous pensions. But that same mercurial process can take them away.
Is the problem that pensions are using up large chunks of municipal budgets that have been stretched thin by the recession and might be better used elsewhere (1) or people who retire on a 90% pension at age 50 partly by gaming the system (2)?
If (1), I can see the point. But LA may be exceptional — the chart that Paul Krugman generated yesterday from census data has pension costs at 6%. In particular, LA has a large and powerful police union and California’s budget system is infamously broken. Does Chicago have similar problems? Indianapolis? If not, then this is best dealt with at a local or state level; no need for a conversation about public employee unions in general or as such.
If (2), the LA Times article suggests that this is primarily police and firefighters. So, first, there’s no need for a conversation about public employee unions in general or as such. The question is whether people in these fields deserve somewhat large pensions (I wouldn’t consider $45k a year coddling, `fancy’, or `lavish’, especially when we’re talking about LA) at an earlier age. I think a clear case could be made for firefighters, street police, jail and prison guards, and detectives, whose work is generally dangerous; perhaps less so or not at all for police in desk jobs and command or administration. But I’m not sure. It’s at least not obvious that it’s unfair for firefighters to retire relatively young and with a comfortable pension.
— Dan Hicks · Aug 10, 01:04 PM · #
Conor,
I think you are misunderstanding Kevin’s argument here.
As I see it, he isn’t saying that reforms in the way public sector benefits aren’t necessary. Of course, they are. When money is scarce, it needs to be allocated more efficiently.
I think his broader point is how easily we have internalized the logic of the market. Our private sector jobs are very insecure, we could be laid off any time, and we lose all our benefits, including health care. Yet, we take this insecurity as a part of our lives (“the world is what it is”) and never even question this status quo and instead focus all our anger on employees who have more security in their jobs. It’s amazing! I was talking to some friends the other day and the same thing shone through: they hated unions, wanted to bring them down, but when I asked them what they thought about the insecurity that comes with our private sector jobs, they just shrugged their shoulders and said “that’s capitalism.”
Which is not to say that we need regulation that forbids the private sector from laying off people. I wouldn’t want to do that. May be there could be more <em>social disapproval</em> of layoffs. Look at the BP oil leak. One could just dismiss it as “that’s capitalism,” no? After all, ecological disasters do happen. But we don’t, and even if BP manages to avoid paying monetary damages, its reputation has suffered a hit and it is even now spending a lot of money on a PR campaign to re-establish its image. Why couldn’t we have the same kind of attitude towards layoffs?
Anyway. I am just throwing off ideas here. But I think Kevin’s point is more philosophical and he’s not really against reforms in the public sector
— scritic · Aug 10, 02:15 PM · #
scritic, that’s not just capitalism. It’s the entirety of human existence until the last 100 years or so. My dad was in a union for a company that went bankrupt (Eastern Airlines) and lost some of ihis benefts. Fortunately he had an IRA to help offset it. United Airlines employees are in a similar situation today.
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— true religion jeans · Aug 11, 06:53 AM · #
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— The Reticulator · Aug 12, 11:08 PM · #