Good pensions serve to boost economy, not drain it
Gregory Floyd President | 3/1/2012, 3:59 p.m.
These days, at both the city and state level, some politicians make public pensions sound like a black hole where money disappears. Nothing could be further from the truth.
The money we set aside for retirees is also an investment fund for our economy's future. For the most part, pension payments filter through retirees and directly back into local economies. We not only maintain the dignity of New Yorkers in retirement but ensure that they are still contributing to everyone's economic prosperity.
It would be nice if we lived in the world that the news media paints for public sector workers, where we make hundreds of thousands of dollars and live a life of luxury. In reality, the average public worker receives $19,000 a year from their pension, and most of it goes toward making ends meet.
The National Institute of Retirement Security in Washington, D.C., found that in 2006, each dollar New York State paid out in pension benefits supported $1.41 in total economic activity. That number comes from direct spending by each retiree, plus the goods that businesses must buy and the people they must hire to serve each retiree customer.
In addition, public sector workers get paid less than private sector workers doing the same job but receive more secure benefits in return. If we do not provide those benefits, there is less incentive for hardworking people to join the public payroll or stay there for their entire careers. With a diminished workforce, governments will lose money by training new workers or having less productive employees on the job.
Cutting pension benefits or putting retirement savings at the mercy of the stock market is "penny-wise but pound-foolish." We may save a few dollars in the short term, but we will be dealing a hard blow to the economy in the long term. When officials talk about pension reform "savings," they only calculate the amount that the government pays directly into pensions. They do not factor in the increased tax revenue, economic development and government productivity they will lose.
Public sector jobs with strong pensions helped build a middle class, allowing people to live comfortably while working and in retirement. It's true that people are living longer and we must plan for that trend to continue, but there are better ways to do that than setting up future generations for hardship in retirement.
Current retirees and workers have strong protections in New York to safeguard their pension benefits, but we cannot forget about the next generation. The recent recession and poor stock returns have hurt the bottom lines of local and state governments, but that does not mean it will stay that way forever. Many predictions about the collapsing pension system have been shown to be exaggerated. It may be easy to scale back pensions and save money now, but in several decades, we will be regretting that we ever did.
This issue speaks to the larger debate about the worth of public sector workers. Many people, critical of our pensions and health care benefits, say we are a drain on the economy. We need to put a stop to that kind of thinking. We must spread the truth that public sector workers are important assets to our communities and the foundation to the middle class.