I’ve been meaning to highlight Jeannette Neuman’s recent report in the Wall Street Journal on public sector workers who’ve been willing to accept less-generous public pensions as a way of staving off furloughs and lay-offs:
This year, nine state legislatures have voted to reduce benefits, increase monthly contributions or both for current workers and sometimes retirees, according to Keith Brainard, research director for the National Association of State Retirement Administrators. Unions and workers’ associations in at least two-thirds of those states have supported the rollbacks.
“It’s an exceptional moment,” said Harley Shaiken, a professor at the University of California, Berkeley, specializing in labor issues. “The depth of the crisis and the lack of a near-term solution have led some unions to conclude that they’re willing to save what they can to make the system work.”
To be sure, the concessions are not nearly big enough. For the most part, this represents a tactical move to forestall the kind of reforms that would put state and local pensions on a truly sustainable footing:
In some instances, unions that are making concessions are trying to ward off what they see as a much bigger threat—the specter of a switch from a defined benefit plan to a defined contribution plan, which is similar to a 401(k) in the private sector.
That worry was behind some recent union concessions in Minnesota, said Eliot Seide, executive director of AFSCME in St. Paul. Mr. Seide said his board agreed to a reduction in cost-of-living adjustments for current retirees “reluctantly,” so that “we don’t kill the goose that lays that golden egg.”
We wouldn’t want to do that. And incidentally, if you are a net contributor to a state government, you’re the goose.