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Sunday, March 06, 2011

Employee Pensions are *Not* Bankrupting States

From Kevin Hill at McClatchy:

Why employee pensions aren't bankrupting states, by Kevin G. Hall, McClatchy Newspapers: From state legislatures to Congress to tea party rallies, a vocal backlash is rising against what are perceived as too-generous retirement benefits for state and local government workers. However, that widespread perception doesn't match reality..., a comparison ... to ... the private sector reveals ... no evidence that state pensions are the current burden to public finances that their critics claim.
Pension contributions from state and local employers aren't blowing up budgets. They amount to just 2.9 percent of state spending... The Center for Retirement Research at Boston College puts the figure a bit higher at 3.8 percent.
Though there's no direct comparison, state and local pension contributions approximate the burden shouldered by private companies..., about 3.5 percent of employee compensation.
Nor are state and local government pension funds broke. They're underfunded, in large measure because — like the investments held in 401(k) plans by American private-sector employees — they sunk along with the entire stock market during the Great Recession of 2007-2009. And like 401(k) plans,... public-sector pension plans are increasingly on firmer footing as the rising tide on Wall Street lifts all boats.
Boston College researchers project that if the assets in state and local pension plans were frozen tomorrow and there was no more growth in investment returns, there'd still be enough money in most state plans to pay benefits for years to come. ...
The most recent Public Fund Survey by the National Association of State Retirement Administrators showed that, on average, state and local pensions were 78.9 percent funded, with about $688 billion in unfunded promises to pensioners. Critics suggest that the real number is at least $1 trillion or higher, using less-optimistic market assumptions. The unfunded liabilities would be a problem if all state and local retirees went into retirement at once, but they won't. ...
Another misperception tied to the pension debate is that while the private sector has shed jobs during the economic crisis, state and local government employment has grown — and pensions along with it. ... When calculating from December 2007 -- the ... start of the Great Recession -- state and local government employment has fallen by 703,000 jobs...

Eve Gerber interviews Richard Freeman in The Browser:

...Q: Does Rebuilding Labor shed light on how labor can survive the tidal wave of anti-union sentiment sweeping across American statehouses?
The authors couldn’t foresee the current wave of anti-union feeling. I don’t think anyone saw this coming, because the unions didn’t cause this recession, and they didn’t cause the budget crisis that the states are dealing with.
Collective bargaining by state and city employees is regulated by state law. ... Because some states have laws that make state and local employee bargaining difficult or even illegal, while others have laws that make collective bargaining the norm for state and local employees, we can see what unions do in the public sector by comparing states. If you look at states that don’t have much collective bargaining and ask whether or not they have lower deficits than other states, the answer is no.
The state fiscal problem – much less the country’s anemic jobless recovery – is not a problem associated with collective bargaining. ... What is going on right now is not a response to an economic problem. It’s politics. ...
Removing collective bargaining from the public sector and lodging all power with employers will not solve the economic problems of U.S. states and cities. It will just remove one mechanism for bringing workers and management in the public sector together to deal with the fiscal problem that neither of them caused.

Jacob Hacker and Paul Pierson in the Washington Post:

...[U]nions play another role...,  one more like that of civic groups than private associations. Although they want "more" for their members, they also want to make good middle-class jobs the norm. And the most important way they pursue this larger goal isn't by demanding concessions at the bargaining table, but by operating as a counterweight to the demands of corporations and Wall Street in the corridors of power. That is precisely why opponents of organized labor are seizing upon state fiscal troubles to try to destroy its remaining clout. ...
Decades of research have shown that the economic pyramid is flatter in countries where unions are stronger. ... The reason isn't just that unions defend their members. They also create changes in social norms, such as pressures for nonunion employers to match union gains. A recent study by the sociologists Bruce Western and Jake Rosenfeld suggests that, including these indirect effects, labor's decline may account for as much as a third of the rise in American wage inequality since the 1970s.
Unions also push for broad federal policies that reduce gaps in income and wealth. In the United States, they have resisted the rampant deregulation of financial markets and the soaring growth of executive pay. They have been one of the few organized voices that has consistently pressed back against the string of tax-cut bills for the rich that began in the late 1970s. ...
Critics of unions, such as Gov. Walker, want to cut government and reduce taxes on the wealthy. (Dire budget rhetoric notwithstanding, Walker's first item of business was to reduce taxes on corporations and the well-off.) And they would much prefer to do it without unions calling them to account. ...[T]he goal of union opponents is not to exorcise "special interests" from American politics. It is to protect the special interests that represent corporate America and Wall Street from any serious challenge.


    Posted by on Sunday, March 6, 2011 at 10:17 AM in Economics, Income Distribution, Politics, Unemployment | Permalink  Comments (28)


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