Pensions and salaries

Statistics tell us that middle class wages have been stagnant over the past 30 plus years and there are a number of reasons for this, one being the tendency of public sector workers to accept lower pay for increased benefits, mostly in the area of retirement and health care. Since I spent many years calculating retirement benefits for people. I use this as example to illustrate the point. Most public employees are unionized and have defined benefit pension plans. These are plans that guarantee a pension based on years of service. Typically they will pay a man 1.5% of his final salary for each year he worked. If he retired with 30 years of service he would receive 45% of his final pay. Here is an example of how it works. A man starts working for the company at age 32 and retires at age 62. First calculate his net pay before retirement. $40,000 gross -11,400 standard deduction - 7,400 personal exemptions(2) $21,200 taxable income $2,330 federal tax plus $700 state tax plus $3,060 payroll tax $33,910 net pay assuming no deductions for health care or pension Retire with 45% of pay or $18,000 plus $15,000 social security or $33,000. There is no income tax or payroll tax for this retiree. I have visited with many people who did not plan to retire at 62 but when I pointed out they would be working for free they changed their minds. In reality most of the people I worked with who were union employees have more net income after retirement than when they were working. Since most of these people accepted benefits in lieu of salary it is particularly difficult for them to now see cities, counties and states who cannot afford to keep the promises that were made to these retirees.