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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: axial who wrote (108789)	2/23/2010 6:03:09 PM
From: Jim McMannis	5 Recommendations Read Replies (2) \| Respond to of 116555

RE:"As stated previously, annual wage increases have been limited to 2.5% or less for a decade." Not here. The Sheriff got a 17 per cent raise across the board last year in the face of shrinking tax base. Where do you live? You also overlook perks like overtime. Wearing a taser. etc.

To: axial who wrote (108789)	2/23/2010 6:52:01 PM
From: ajtj99	11 Recommendations Read Replies (4) \| Respond to of 116555

I can't take it anymore. YOUR ignorance is astounding. I've got Mish's back on this. When these people talk about 2.5% annual wage increases, they conveniently leave out the automatic cost of living increases baked into the contracts of the unionized public employees. Non-union private sector workers (about 92% of the workforce) don't typically get automatic cost of living raises. Take a 2.5% annual inflation rate and add in the 2.5% annual pay increase and you get a 5% annual increase. In nominal terms, that adds up to a 55% increase in wages over a decade. In real terms, that adds up to a 25% increase in wages over a decade. I don't have the numbers from the BLS, but I estimate a public sector employee getting a 2.5% real wage increase over the past decade gained at least 25% more in real raises than their private sector counterparts. Add in the diverging benefits packages over the past decade that saw private sector employees losing health benefits as well as retirement benefits, and you have a good portion of the 45% disparity between the public and private sector employees performing the same function. The main issue I see is the general public understands and is focused on wages when the real problem is unfunded pensions and retirement medical benefits. The current medical benefits are also an issue, but they are more easily addressed. The best method I see to fix the system is to do what the private sector had to do in 1992 - require all state and municipal public pension (and we should add medical funds) to be currently fully funded, not pay as you go. Ideally we'd do that on a federal level for employees as well. This simple fix would force an immediate solution to the problem - either tax citizens at an additional 20% of their income to pay for these benefits, or have the municipalities declare bankruptcy and re-work the budgets, contracts, and benefits packages to get into compliance. They'd probably have to amend the US Bankruptcy Code for a solution for the individual states. This is not about class warfare. This is about fiscal responsibility. We are not going back to the 60's and 70's when high school drop-out autoworkers could turn a bolt on the line and make more than college graduates, retire after 25-years, and kick back and collect fat pensions and medical retirement benefits. The days of retiring at age 50 are over with. Public sector workers should retire at age 65 or 70 like the rest of the general population is going to be. That goes for school teachers as well. We live in a global economy, and the sooner folks wake up to that reality the sooner they will begin to adapt. Real wage growth in the private sector historically has been tied to increases in productivity, although recent increases in productivity have a lot to do with imported productivity (components and parts produced overseas) than real productivity growth. If public sector employees want wage growth, I suggest they first get to compensation parity with their private sector counterparts with a 30% compensation cut, then be granted increases in line with their increases in productivity, provided they remain in parity with the private sector. Of course, that is in addition to fixing the pension and retirement medical benefit problem for public employees.