At this point, I almost feel that everyone who might ever take a look at Room Eight either knows what I would think about things, or is willfully not dealing with the issues I raise. But in case someone is merely dense, here once again is what I think of Mayor Bloomberg’s pension proposals. Any difference in total compensation, the sum of wages, pensions and other benefits, between older and younger generations of public employees represents a social injustice – and/or a reduction in the future quality of public services. The only question is the nature of that injustice, who benefitted from it, who will lose (or has lost), and how. Therefore, any change in pension benefits for future employees should be offset, dollar for dollar, by higher cash pay for those employees, or higher pension contributions for existing employees.
That is not what is being proposed. What we have is yet another cycle of screw the newbie, flee to Florida, with older generations passing retroactive pension enhancements for themselves on their way out the door, and then hitting younger generations of public employees with lower wages and benefits and the New Yorkers who remain here with diminished public services at higher tax rates. Mayor Bloomberg claimed he was different. But he has exactly replicated the policies of New York’s machine pols, to the detriment of the city’s future, because that was and is the path of least resistance in the era of Generation Greed.
Are the retirement benefits for new public employees that Bloomberg has proposed fair, given what the people who pay for them in the private sector can expect to receive in their own jobs? Let’s say they are. In that case, the retirement benefits that existing and retired public employees received are unjust, particularly if they were retroactively enhanced compared with what was originally promised when those employees were hired. Unjust in that these benefit enhancements, described as “free” when passed without warning in years past, are unfair to the less well off general public, who will have their taxes increased and services cut to pay for them.
It simply is not true that existing and retired public employees cannot be asked to give something back because of constitutional protections, or collective bargaining. By state law, every pension deal since these employees were hired has been non-contractural. And while pension benefits “cannot be reduced or impaired” according to the state constitution, existing public employees could have their pension contributions increased — they are among the lowest among public employees nationwide. And existing retirees could be forced to pay for their retiree health care, to make up for the contributions they didn’t make, since most American’s don’t even get employer provided retiree health care.
Higher contributions by existing and retired public employees would help to maintain a pension system that is in trouble because of the retroactive pension enhancements of the past 15 years, including the ruinous 25/55 pension plan for teachers Bloomberg agreed to just three years ago. As NYC’s public employee unions rightly point out, any changes that only affect future public employees do nothing to fill the existing hole that existing and retired public employees have opened up. And given recent history, one could argue that reductions in benefits for future public employees are not even real reductions in benefits. Since those benefits could once again be retroactively enhanced, in a 3 am deal that no one has heard about, 25 years from now. For that reason Bloomberg hasn’t really proposed diminished benefits for future public employees. He has proposed paying less for those benefits now, and probably more later, again.
What if the retirement benefits of existing public employees, with the retroactive pension enhancements included, are “fair?” Because like the top executives who sit on each other’s boards and set each other’s pay, and like the Wall Streeters that earn big bonuses by having their customers lose money, the unionized public employees are “winners” who have “won” the benefits. That is what the unions claim.
In that case, it is future public employees would be cheated by a deal that reduces their benefits while maintaining them for those who went before. Aren’t they winners too? And aren’t they forced, by state law made permanent just a couple of years ago, to pay money into those very same unions? If public services are going to be sent into a downward spiral by soaring pension benefits, don’t they “deserve” an equal piece?
Of course, the unions could argue (and have argued) that even if they receive lower pay and benefits, future public employees have nothing to complain about, because lower benefits will attract less qualified and motivated employees who will do less work, and better workers don’t have to take the job. In that case, however, future public service recipients would be cheated, with the savings going to either past public employees with excess pensions or past taxpayers.
A comparison with private sector workers, however, shows there is no way that the retirement benefits existing and retired public employees receive are just. Particularly since they were enhanced after those employees were hired, and among retirees in many cases after they were retired, and thus cannot be said to merely be what was “promised.”
These benefits provide one year or more in retirement for every year worked. There is no way that the same benefits could be provided to everyone, except at a drastically lower standard of living for everyone. Governments forcefully take people’s money up front, whether or not they believe the public services and benefits provided in return are worth it or not. In contrast, if the price and quality any business offered to consumers reflected the pensions benefits existing and retired public New York City employees receive, those existing and retired public employees would shop elsewhere for a better deal. Those union members vote to cut the benefits of private sector workers every time they go shopping. And would the public sector unions support providing the same benefits to everyone through coercive taxation, as in Greece? Only if they didn’t pay for it, as in Greece. To provide the same benefit to everyone, by my calculation, you would have to cut everyone’s take home pay by 20 percent. Over and above the cut that is coming anyway due to federal, state and local deficits.
But no, the public employee unions do not want everyone to get the same retirement benefits, just as the executive class does not want rank and file employees to get the same inflated salaries. It wouldn’t be affordable and, economy-wide, wouldn’t add up, because people would be theoretically promised more in goods and services than the remaining workers would be able to produce.
The assertion that public employees gave up salary in exchange for richer retirement benefits is not borne out by the trends of the past 35 years. The quality of worker the City of New York has recruited, the quality of work they do, and the number required to do the job, has varied with the level of cash pay, particularly initial cash pay. To the extent that public employees were paid less in cash, they did less and had a resentful attitude at work, egged on by their unions.
Not that Mayor Bloomberg has been unwilling to cut the cash pay of future public employees either. He cut the pay of future workers in most titles by 15 percent, and the pay of new police and firefighters at one point by 40 percent, to pay for a better deal for those cashing in and moving out.
But at least in the case of teachers, he understood that to recruit better workers the city needed to raise cash pay – to a level per hour worked that now exceeds those in most occupations save for the Wall Street profiteers. Yet he has already cut the cash take home pay of future teachers, to try to limit the damage from the 2008 25/55 pension deal, in a subsequent deal to force them to pay more into the pension funds throughout their careers (those now approaching retirement at 55 paid very, very little). But it doesn’t matter, because that deal was so expensive the city isn’t going to be able to afford any future teachers.
Finally, it just isn’t true that keeping equal compensation between different groups of public employees would require that pension plans be kept static. The Mayor could have proposed, for example, that state labor law be modified to require that employees hired under less excessive pension plans be paid 20 percent more than those who went before, and that existing public employees be subject to a wage freeze and a freeze in the employer contribution to their health insurance until their pension plans were fully funded. But he didn’t. He proposed two sets of rules for two sets of people, older generations who matter and the younger generations they don’t care about. Because he knows that is what the unions want, despite their feigned outrage.
So there you have it. When you have two sets of rules for two sets of people, as you would under Bloomberg’s proposal, someone is being cheated. Either existing and retired public employees have robbed everyone else by receiving unfairly lucrative pensions. Or future public employees would be cheated under the proposal. Or future public service recipients would be cheated.
The pension enrichments of the past 15 years, along with the similarly repeated debts, are going to re-destroy the public services provided to New Yorkers for the foreseeable future. Or perhaps the indefinite future, because open minded people (like myself) are thus compelled to give up on public services and benefits regardless of prior beliefs. That is the similarity between the current round of “screw the newbie, flee to Florida” and the cycle of the 1960s and 1970s. What are the differences?
First, the “same” pension benefits have become much richer. For example, the teachers who benefitted from “Tier 1” pensions had to contribute five percent of their salaries to the pensions throughout their careers before retiring at age 55. Only future teachers would face a similar burden under the deal Bloomberg cut for teachers in 2008. Those age 55 at the time were able to walk out the door without contributing an additional dime, while others are now contributing 1.85% of their pay in exchange for the privilege of retiring seven years earlier than they were promised when hired, and 12 years sooner than the less well off who have nothing else will be able to collect Social Security.
Life expectancies at age 55 were lower back when the Tier 1 benefits were passed, so the number of years taxpayers were required to support those not working were fewer, compared with today. And the cost of health insurance for retirees was much lower. Finally inflation, which ate away at the cost of Tier 1 benefits and thus allowed the city to eventually recover, was higher than today, although that could change. In effect even without retroactive pension enhancements, the retirement benefits of New York’s public employees had already risen a great deal, perhaps surpassing Tier I levels. Now with those enhancements, the retirements are richer than those provided by Mayor Lindsay.
Second, back then, the U.S. had experienced a nearly uninterrupted improvement in the quality of life and standard of living of its citizens, with each generation sacrificing for those coming after and hoping to build a legacy. So it might have been believed that public policies that enriched older generations and made younger generations worse off would be balanced in other ways. Now that is clearly not the case. Not after nearly 40 years of wage stagnation. By passing retroactive pension enhancements, hiding and putting off the cost, and then cutting the pay and benefits of future public employees and public services, less well off generations have been sacrificed by benefit better off generations.
What possible excuse could Mayor Bloomberg have for what he had done and not done, proposed and not proposed. He could claim that in the U.S. as a whole every generation, since the generation that came of age in the 1960 and early 1970s, has (save for those in a position to decide on their own compensation) been worse and worse off. Because they have been sacrificed by older generations who have made themselves better off at the expense of those coming after. And therefore state and local government, by making future public employees worse off that those who came before them, would not be any different, and would not risk losing qualified workers to other parts of the economy.
If the Mayor’s belief is that because his generation has so disadvantaged those coming after in every way, that doing so in New York City labor relations will make no difference, then I ask that he say so. But whatever his belief, I demand that he and the state legislators and the union leaders and the rest face the question – what is the meaning of what they have done and proposed to do? Yes, there is meaning. What is it? And as for the union leaders saying the existing benefits are what they “fought for and won,” I ask you who were you fighting against, and when will they lose as a result of your having defeated them? “The rich.” “The corporations.” No, those are the other winners. Stop lying and look in the mirror.
“La la la la la – we’re not listening!”
I’ll say it again, collectively younger generations owe those over age 50 nothing. Individually, they may owe their own parents a great deal. But given the changes in family structure since Generation Greed came on the scene, only a minority of younger generations have those obligations.
As Henry Shue said in his book Basic Rights “for everyone healthy adulthood is bordered on each side by helplessness, and it is vulnerable to interruption by helplessness, temporary or permanent, at any time…The infant and the aged do not need to be assaulted to be deprived of health, life or the capacity to enjoy active rights. The classic liberal’s (ie. libertarian) main prescription for the good life – do not interfere with thy neighbor – is the only poison they need.”
So what would it mean if the generations that have thought first if themselves, collectively, throughout their healthy adulthood, when they finally lose control of our institutions and find younger, less well off generations responding in kind? When they are in their 80s and 90s, and most need their help? As someone who has spent a lifetime thinking about the moral meaning of public policies I will have one word to say.
Karma.