Showing posts with label pensions. Show all posts
Showing posts with label pensions. Show all posts

Saturday, September 10, 2016

Privatizing Pensions--Chile

I'm old enough to remember when the right was pushing the idea of privatizing pensions, pointing to the success of Chile's system.  (They'd been advised by Chicago-school economists, 
and see this.)

But the NYTimes today reports that the system is under fire, because the benefits received under the system don't replace more than 36 or so percent of wages and for other reasons.

We liberals will doubtless say "we told you so", which is always fun.  But the better lesson might be to always be careful of reforms sold as panaceas, from whatever side.  Humans tend to run from one side of the boat to the other, whether under the grip of enthusiasm or despair.

(I wonder how New Zealand's economic reforms, particularly of the agricultural economy, are faring these days?)


Sunday, January 06, 2013

The Geezers and the Future

The Times has an article today arguing that Social security is in worse shape than we know, because the actuaries at SSA don't have a good grasp on demographics.  The authors present a lot of graphs and seem rather convincing.

However, I've my own theory, based on simple economics, so it's probably wrong.   

Everyone points to the facts that the baby boomers are getting older, and mostly they're living longer, while the working population is not increasing as fast.  The result is each geezer dependent is and will be supported by fewer workers, meaning the taxes on the workers will have to go up to provide the pensions the geezers have been promised.  That seems sound logic.

But, the geezers don't and won't live on their pensions, not on paper money, they will live on bread and butter and real things, produced by real people during the days and months they're living.  So what happens?  If I understand economics, when the supply (produced by workers) gets small, and the demand (from geezers with fat pensions) is large, the effect will be to boost the wages of the workers.  That should bring more workers into the system, whether by geezers finding it rewarding to work longer or to work parttime, or by workers having two jobs and working overtime, or by immigrants coming into the country.

The one problem I see is the indexing of pensions for inflation, because this process of adjusting the economy would go a lot faster if the pensions weren't indexed.  Perhaps the alternative will be for workers to be paid in intangible benefits, stuff which benefits them and makes work more attractive but which doesn't get reflected in the cost of living indexes.  Is that what's happening in Silicon Valley, with all the fringe benefits? 

Monday, June 06, 2011

Erroneous Payments from OPM

Amidst the concern about government agencies making erroneous payments, add another to the list.  Apparently OPM has a problem making annuity payments to dead retirees or their spouses.  The article says they check the SSA's death data, so it's not clear whether it's an OPM problem or a SSA problem.

Wednesday, March 02, 2011

401k for Governments

The Times has an article on states looking to 401K type defined contribution plans [employee kicks in a percentage of pay, employer may match part or all of it, retiree gets back the results of investing the contributions, good or bad]. I assumed, as usual wrongly, that most states had gone to defined contribution plans decades ago.

Reagan's breaking of the air traffic controllers union is widely remembered.  What's less remembered is the redo of the federal retirement system.  Old timers, like me, are under the Civil Service retirement system, a defined benefit system [annuities are based on length of service and salary] with no social security.  During Reagan's time (1986) new employees were put on a three level system: social security, a smallish federal defined benefit annuity, and a 401K type investment plan, with matching from the government. Unlike social security, the government doesn't have a pension fund to cover my civil service annuity or the FERS annuity; those payments come out of the yearly budget. As it turns out, what I first wrote was wrong. I decided to do a little more research before posting and found this link, which explains the unfunded government liability for CSR annuities will rise to about 850 billion dollars in 2030. But the actuaries say that's okay.

The change was better for the government and employees got more flexibility through the 401k/TSP plan, though they assumed some risk.

From the Times article it seems many states are still where the Feds were before 1986.  I'm not clear whether the state pensions are indexed for inflation, which the CSR annuities.