Generous public sector pensions no longer are compensation for lower wages

The argument no longer holds true that pension programs for civil servants need to be more generous in order to compensate civil servants for lower public wages.  Generous public sector pensions no longer are compensation for lower wages. In fact, there’s evidence that the wage level in the public sector is typically higher than in the private sector in all but the top fifth of the income distribution.

If on top of that public pension programs are more generous than private pension programs, equity issues eventually will arise, in addition to concerns about economic sustainability in countries with the beginnings of population aging. Surprisingly, there have been very few studies undertaken on the reforms of sector-specific pension programs, such as pension programs for public sector workers, compared to the considerable literature on national pension programs.

This doesn’t mean that I advocate reductions in public sector pensions. But I do believe that it is incumbent upon governments to weigh the consequences of ignoring the issue.



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2 responses to “Generous public sector pensions no longer are compensation for lower wages

  1. Wouldn’t you say this have more to do in North America with the drop in real earnings (and pensions) in the public sector brought about by trade dysregulation over the last 20-30 years?

  2. Nice try Dan, but that dog ( blame it on ____ – fill in the blank) will not bark these days. Salary and benefit growth for public sector officials/workers has outstripped that of workers in others sector over the past 20 years for only two reasons..the unchecked influence of public sector officials in determining when/how much their raises should be & the absence of effort on their part to do anything beyond increasing taxes/user fees on the public to increase their “supply” of revenues. Most others have to work harder, longer, smarter to positively increase revenues available to the enterprise. (Think about it…Gov’t offices still close at 4:30 PM and are open only 5 days/week…User fees and taxes have increased for teh services we get and there are more employees to deliver fewer services. How is that working harder/smarter, longer?)
    There is a reason that this whole pension and salary question is getting so much press. The public is FED UP with self-serving/ self entitled gov’t employees constantly securing their own higher standard of living and pensions. If you are among the minority who are advocating the status -quo because “it’s owed to you” – get off the train track…there is an out-of-control locomotive coming through.

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