Unions

I have long been a proponent of private pensions but not public pensions. The benefits of public pensions are paid for by the taxpayer and the elected officials bargain with union officials for benefits. Over time the unions help to elect the public officials and the negotiations become incestual. The Chicago teacher’s union is a good example. The average retirement benefit is $76,000 and the average pay is $71,000. Chicago teachers do not contribute to social security nor collect social security but they still retire at higher pay. The teachers contribute 2% of their salary to their retirement plan. The result is that the plan is currently billions of dollars short of providing the promised benefits. This shortage will be made up by raising taxes, diverting revenue from other programs or re amortizing the debt. Public pensions still remain as defined benefit plans while almost all private companies have switched to 401K plans. The latter cannot be underfunded. As the reshoring of America continues, the hope is that many of the new jobs will be union and negotiations will be between the employer and employee and the government will not be involved.