I will protect your pensions. Nothing about your pension is going to change when I am governor. - Chris Christie, "An Open Letter to the Teachers of NJ" October, 2009

Thursday, October 20, 2011

"Overpaid" Teachers Redux


The effects of this liability are already popping up: when Standard & Poor dropped New Jersey’s credit rating in February, the first explanation given was “concern regarding the stresses from the state’s poorly funded pension system.” Such fallout can only be expected to spread, with Pew reporting that pension funds in 31 states were funded below 80 percent in 2009.
How did the situation get so grim? While the financial crisis and irresponsible politicians played their parts, the defined-benefit (DB) models dominant in the public sector are at the core of the problem. Most teachers, and public workers in general, are shielded from financial uncertainty by plans that guarantee them pensions that pay a set amount, regardless of economic or political changes. This places the risk that the fund will depreciate on the employer, whereas private sector employers tend to remove the employer’s risk and stabilize employer contributions through defined-contribution (DC) plans.  In this model, workers and/or employers contribute a set amount to their retirement fund without a definite expectation of return. [emphasis mine]

Everyone who is honest with themselves knows that college-educated teachers make less money than they could if they worked in the private sector. Why, then, do teachers (and cops and firefighters and all other public workers) take the job? Partially, because it's something they really want to do, and they're willing to earn less to do it.

But another motivation is that they base their compensation on future earnings. They take less up front for the stability of knowing that a modest pension is coming on the back end.

These pension "reform" maniacs are trying to mess with this explicit contract so they can get the short-term benefit of screwing current and soon-to-be retirees out of their contractually due compensation. And there's a good chance they'll find enough morally and intellectually bankrupt judges to let them get away with it.

The problem, however, is that they are taking pensions off of the table now and forever for those entering the workforce. When young people see that pensions were what Mary Poppins called a "pie crust promise" - "easily made, easily broken" - they simply won't accept them. They are going to want to see the scratch up front.

And the taxpayer will have a choice: pay up, or accept a lower quality of worker.

The pension maniacs are playing an incredibly dangerous game; it will have consequences long after they've moved on to the next life. Are we so short-sighted that we can't see this?


Ms. Serdy said...

Yes, yes they are so short sighted. You are correct in stating that when the fallout of these changes make themselves apparent, those responsible will have long moved on to the next thing. Those frothing at the mouth for these simplistic solutions are too selfish to consider the implications for their own children and grandchildren. I was asked this past weekend why all the educated people are liberals or progressives; to be honest it was hard not to answer with the question in reverse.

Anonymous said...

What's with these rich guys?

Lord rest this one's confused soul . . .

[Steve-who else?]Jobs also criticized America's education system, saying it was "crippled by union work rules," noted Isaacson. "Until the teachers' unions were broken, there was almost no hope for education reform." Jobs proposed allowing principals to hire and fire teachers based on merit, that schools stay open until 6 p.m. and that they be open 11 months a year.


Stuart Buck said...

Nationwide, public school average wages, $46,500; private school average wages, $36,300. See http://nces.ed.gov/fastfacts/display.asp?id=55.

In other words, public school teachers make 36.6% more money than their direct private sector counterparts. They are hardly taking a salary cut.

Anonymous said...

If you are going to compare teacher pay to private pay then you need to correct for degree. Your comparison fails.

Anonymous said...

Are you allowing for Bachelor's degrees, Master's degrees, and Doctorate degrees that public school teachers have? You can't say that they are direct private counterparts.

Ms. Serdy said...

Also consider in private schools that class sizes are smaller, the percentage of students in poverty is lower meaning there are less related issues, parents are involved if for no other reason than they are paying for it, and there are less special populations to serve. Any of those alone is not a huge factor but taken together it means the public school teacher must bring more to the table with them.

Stuart Buck said...

Ms. Serdy -- your point is fine, but irrelevant to the question of who makes higher salaries.

The other two of you: your point is also irrelevant. The question is whether public school teachers are taking a "pay cut" by working in public schools. People with masters' or doctorates in education are not taking a pay cut by teaching in public school -- indeed, they're getting a pay INCREASE that they wouldn't be eligible for anywhere else (for the most part). That is, graduate degrees in education aren't worth anything to the vast majority of private employers, and even in private schools, you don't find as many artificial and automatic pay bumps for such degrees. Therefore, people with such degrees are generally not passing up higher salaries elsewhere.

Teacher Mom said...

That's interesting because my cousin got a 10k pay bump last year for earning her MBA with her marketing firm. I guess the idea that people don't earn pay bumps with higher degrees is complete bull.

Also, there are three reasons someone works at a private school, they firmly believe in the religion they are teaching under, they aren't certified, or the couldn't hack it or get a job in a public school.

Duke said...

Stuart, you write as if professional people are locked into a career path the minute they enter college. That's just not so.

The labor market moves and adjusts to supply and demand like any other market. The skills that make people good teachers are fungible; if you have talent to be a teacher, you have talent to do other things.

When college kids look at their options for careers, they are going to be influenced by compensation packages - TOTAL compensation packages. So will career changers. To say otherwise is to deny the market has any influence.

As to your comparison of private and public teacher salaries: the variable of private schools is enormous, and the variability of requirements for the job is enormous so it's not an apple-sto-apples comparison.

Further, there is regional variability here: if private school employment is greater in states with lower teacher salaries (both public and private), it will artificially skew the comparison.

Regardless: unless you are prepared to show specifically how teacher salaries - which haven't kept pace with AVERAGE salaries here in NJ for the last 25 years - are artificially inflated, I don't see the relevance of your comparison.

Thanks for stopping by, everyone.

Stuart Buck said...

Teacher Mom: if you had read what I actually said, you wouldn't think it responsive to point out that an MBA earns more.

Duke: I'm not saying public school salaries are artificially inflated, nor do I need to prove any such thing. The point is that for most public school teachers, the only realistic private sector option would pay even worse. Therefore it isn't true that most teachers are passing up higher salaries elsewhere.

Stuart Buck said...

But you do make a good point about the choices people make at the outset of their collegiate studies. Of course, the situation is different for different teachers. A high school algebra teacher might have had the ability to choose among many different higher-paying fields, whereas many elementary education majors might not.

Duke said...

Stuart, while a specific skill set or specific training may not be transferable, talent, ability, and generalized experiences certainly are.

To be successful, a good elementary teacher needs to be well-versed in a variety of subjects, an excellent communicator, diplomatic, poised, able to solve problems, and able to think on his or her feet. Those skills are always in demand and it would be easy enough for a teacher to get enough training to move into any number of other fields rather quickly.

This is the point: good teachers most certainly could do other jobs with a minimal amount of retraining. More and more will if we keep denying them a decent wage.