Caldwell: The Disparity Between Public and Private Workers

Two ways to get rich today.  One, go into tech and develop AI.  Or go into government—great pay, great benefits and fantastic pensions.  Real workers’ pay for government workers.

“In 1982, per capita income in the county was $59,649. Today, it is $75,720, an increase of only 26% over 40 years. Meanwhile, county government costs grew from $475 per year per citizen to $3,391 per year per citizen, a 613% increase.

The average wage of a Santa Barbara County employee is now $100,000 per year, which is 32% higher than the private sector. Scores of people working in government earn upwards of $200,000 or more per year. Santa Barbara County’s employee retirement plan pays out over $184 million per year. Soon, dozens of former employees will be receiving more than $200,000 for the rest of their lives.

Meanwhile, the infrastructure debt in our county exceeds $400,000,000.”

The numbers speak for themselves.  No wonder government is so far in debt.


The Disparity Between Public and Private Workers

by Andy Caldwell, Santa  Barbara, 2/18/24    https://www.sbcurrent.com/p/the-disparity-between-public-and

A little more than forty years ago, in 1982, there were 298,694 residents in Santa Barbara county compared to today’s population of 448,229. While our population grew 50% since 1982, the county budget grew by 1,000%.

How could this be?

It all has to do with obscene growth in government salaries, benefits, and pensions.

In 1982, per capita income in the county was $59,649. Today, it is $75,720, an increase of only 26% over 40 years. Meanwhile, county government costs grew from $475 per year per citizen to $3,391 per year per citizen, a 613% increase.

The average wage of a Santa Barbara County employee is now $100,000 per year, which is 32% higher than the private sector. Scores of people working in government earn upwards of $200,000 or more per year. Santa Barbara County’s employee retirement plan pays out over $184 million per year. Soon, dozens of former employees will be receiving more than $200,000 for the rest of their lives.

Meanwhile, the infrastructure debt in our county exceeds $400,000,000.

Defined Contribution vs. Defined Benefit

These wages are the foundation of the pension (and budget) crisis that has engulfed California. Private citizens can earn a Social Security benefit that earns a maximum of some $5,000 a month, if they work until they are 70 years old. Some private-sector workers may additionally have a 401k or IRA savings plan, but the amount that can be invested in these accounts is limited by government. Nonetheless, the vast number of Americans have nothing to sustain them in their retirement except Social Security and perhaps the value of their house, if they sell it or borrow against it.

Unfortunately for taxpayers and the budgets of our local and state government, there is virtually no limit to how much can be earned with a government pension plan. The big difference between a private citizen’s retirement earnings and that of the public sector is this: However much money is earned in a private citizen’s account is what they get. That is, the private citizen only gets what his investment is worth at the time he or she retires. That is called a defined contribution plan, the value of which is only determined by the contributions to the plan and how well the plan did on its investments.

Public sector retirement plans are completely different. Career employees earn a percentage of their highest salary for the rest of their lives, even when the payout far exceeds what was originally invested on behalf of the employee. That is because the retirees don’t earn a pension based on their average earnings over the years. Instead, their pension is based on their highest final average salary. In many cases, the highest paid pensioners will receive more money in retirement than they earned during their careers. Moreover, even if the investment lost money, the benefit is fixed based on the years of public service and the final highest salary earned, with the difference being made by taxpayers. This is called a defined benefit plan.

Consequently, the estimated pension debt for all government pension plans combined in the state of California exceeds $1 trillion.

A Millionaire’s Retirement Plan

We used to define a public servant as a person who was employed to serve the public. That description is now extinct. Public servants have now become people who are served by the public. That is, in the old days, the concept of a civil servant was somebody who, like our men and women in uniform, accepted a low-paying job as a means of serving their community. Well, those days are long gone. At least, they are long gone for public servants. Whereas some of our military families still qualify for welfare because they are paid such a pittance (as little as $10-12 per hour), many public sector workers are retiring like millionaires.