Welcome to the Fairness 101 class, students. My name is Professor Brancaccio.
This is a new class for our university and takes a slightly different approach to some of our societal issues.
Today we’re going to look at pensions with — as just noted — fairness as a backdrop.
OK, I think I know the answer to this, but are pensions good? Danni?
“Of course. A pension virtually guarantees you a fixed income when you retire so you can do cool stuff like buy vacation homes and gamble on the ponies.”
Well, yes, but pensions also give you a peace of mind to just live comfortably in your retirement years. OK, now let’s look at who gets pensions. Cooper?
“Well I’m just a student and haven’t paid much attention but I suspect we all do, right, when we get a job?”
Noodles?
“Ah, Cooper, I don’t think so. My dad works down at the bagel shop and he was just talking about his upcoming retirement. And he noted he didn’t have a pension.”
Noodles is correct. If you actually look at the numbers they’re quite startling today. Decades ago private and public pensions were about even. But as the global competitive economy cranked up, private companies ended pensions.
Apparently, the public sector never got the memo. Today only 18 percent of private employees have pensions. The public sector? That’s 78 percent.
“What the …”
Easy, Jimmy. Easy. Hannah?
“But what’s the big deal, professor? Pensions are just money the employee puts away in advance for his or her retirement. Right?”
Not really true, Hannah. There are three legs to a pension fund. Employee contribution, the money that is generated from investments, and employer contribution. And employer contribution in the public sector means taxpayer contribution.
Now does anyone know what the taxpayer contribution in the state of Washington was last year? Anyone? Anyone?
Last year, government employees and investments to the retirement fund came to $1 billion. To meet the pension obligations — to make sure retirees got what the government said they would get — taxpayers had to kick in another $1 billion. For the mathematically challenged, that’s 100 percent.
If you’re lucky enough to have a 401(k) in the private sector and then lucky enough to get your employer to contribute to it, it’s likely to be about 30 percent.
“What the …”
Easy Jimmy, easy.
“Professor, I’ve never heard that $1 billion number before. Is that widely known?”
No. In fact most politicians who are in charge of making sure our tax dollars are spent wisely don’t know that number. Yes Fernando?
“But professor, how can any politician say they’re watching out for our best interest, if they don’t know what they’re spending?”
Good question. I wish I had an answer, Fernando. I don’t. Danni?
“So do I have this straight? Most people in the private sector don’t have pensions. Most people in the public sector do. Taxpayers are kicking in 100 percent to make sure those public-sector pensions are solid, essentially paying for something they can’t get themselves. Is that fair to private workers, professor?”
Anyone want to answer that? Anyone? Anyone? Class dismissed.
Lou Brancaccio is The Columbian’s editor. Reach him at 360-735-4505, lou.brancaccio@columbian.com or Twitter: http://twitter.com/lounews
