The Fastest Growing Class of U.S. Millionaires: Government Workers Making 2X Private Workers
From "The Millionaire Cop Next Door" in Forbes:
"Who are America's fastest-growing class of millionaires? They are police officers, firefighters, teachers and federal bureaucrats who, unless things change drastically, will be paid something near their full salaries every year--until death--after retiring in their mid-50s. That is equivalent to a retirement sum worth millions of dollars.
If you further ask the question: How much salary would it take to live, save and build a $2 million stash over a 30-year career, the answer would be: somewhere close to $75,000 more than the nominal salary, if you include all the tax bites associated with earning, saving and investing money.
In other words, if a police officer, firefighter, teacher or federal bureaucrat is making $75,000 a year, she is effectively making twice that amount. Implied in her annual pension payout is that she diligently saved half of her annual salary--after taxes--in order to save, invest and build--again, after taxes--the $2 million pot.
So when you hear that government workers now make, on average, 30% more than private sector workers, you are not getting the full story. Government workers make more than twice as much as private sector workers, on average, when you include the net present value of their pensions."
HT: Steve Bartin
16 Comments:
I tend to empathize with those who feel as if society has asked the private sector to assume the lion's share of the risks in our economy -- after all, how many government employees have ever been exposed to mass layoffs on the scale that the private sector experiences regularly -- you would think that those in the private sector would be paid a "risk premium" in their wages that would place their earnings ahead of the public sector.
Regardless, if the "inflation solution" arrives to rebalance the economy, then those with government salaries and pension could very well see their government payouts "routed" by 50% and more in only a few short years. More at:
http://wjmc.blogspot.com/2010/05/using-inflation-to-reduce-public-debt.html
If the US were to experience 1970's level inflation today, then everyone working for the government or receiving entitlements will suddenly become envious of the private sector once again. My gut is that the US is already on the path to hyperinflation irregardless of the implications. The future of government salaries, pension, and entitlements look bleak from where I sit. My advice to those relying on the government for their standard of living is to join the private sector sooner rather than later.
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Better pay, better benefits, and almost impossible to fire! Woo hoo, where do I sign up to be dead weight for my neighbors to carry?
"Millionaire" is so Gilligan's Island. You sound like Dr. Evil.
A quarter of the population of California are "millionaires".
I'm not disputing that public workers are overpaid and receive overly generous benefits particularly when represented by unions.
But I tend to think university professors are overpaid for what they do too.
So how come every time I considered taking a government job I didn't because it involved a huge pay cut, not counting retirement plan?
Attn Anon, I also considered taking a government job because of adivce givern by my father (a businessman). He said I would have to accumulate millions to equal what a government employee gets in pension. The pay for government employees averages more then 20% higher then private. No need to worry about the threat of downsizing, hard to get fired, great benefits and constant raises.
Attn Distal (Benny?), University professors have a high degree of learning and once a prof the rigorous demands of teaching and publishing. Do other government employees have demands other then their basic pay grade jobs?
destal-
you must be using some definition of "millionaire" with which i am unfamiliar.
nothing like 25% of Californians are millionaires.
even at the peak, fewer than 3% of Americans had $1 million in net assets.
given that there are 37 million people in CA and 306mm nationwide, a 25% millionaire count in CA would be 9 million millionaires, more than existed in the whole country at the peak of the real estate boom.
you are wildly off on that number. the real number is more like 5.3%.
"california isn't as much of a golden state this year, according to a new report on how many millionaires it has.
The state dropped to No. 9 in 2009 from No. 7 in 2008 in terms of the percentage of millionaires who live in its borders, an annual ranking by Phoenix Marketing International shows.
The ratio of millionaires to total households has dropped to 5.28 percent after being as high as 5.78 in 2007 when the state ranked No. 10.
The total number of California households and those whose net worth exceeds $1 million leads the nation by a wide margin. But the ranks of its millionaires dropped about 8 percent to 662,735 this year from 722,681 last year."
You forgot to include government contractors. One particular non-profit defense contractor that starts with M will give you the option to relocate or fly you bi-weekly at their expense.
The latter option including lodging would be around $60k/year for one route.
No need to worry about the threat of downsizing, hard to get fired, great benefits and constant raises.
Maybe, but my experience suggested to me on several occasions that the dues to be paid in lower initial salary was significant.
I thought most pensions are now indexed to inflation as well as a lot of other payments, so inflation will not be the bailout that it once was.
but maybe I am wrong about this
>""Millionaire" is so Gilligan's Island. You sound like Dr. Evil."
I don't remember Dr. Evil being on Gilligan's Island, but that WAS a long time ago. Perhaps memory fails me.
>"you must be using some definition of "millionaire" with which i am unfamiliar."
I'm not sure about an unfamiliar definition of "millionaire", but I think I detect a tried & true debating technique called "exaggeration".
Even with today's taxes it is not all that hard to acquire a million.
As someone put it, the first million is hard work and the second million is inevitable.
But without strong property rights to protect your million, there is not much point in getting it.
Americans for Tax Reform have a breakdown for the costs of hiring a federally financed parasite...
Probably correct in general but not in many specifics. I worked for the Federal government for 34 years and am now retired. The agency I worked for is characterized by having over half of the workforce with college degrees and, as in the private sector, "requirement creep" has required a Masters Degree for success at the middle manager levels. I had a Masters Degree and at the end of my employment I was at the GS-13 level earning in the mid 60 thousand a year range. That was considered the upper middle range of success in my profession for middle managers. Through that period I contributed 7% of my salary to my retiremnt and during Reagan's term that was raised to 9%. I currently receive about 2/3 of my "high three" salary years and get a cost-of-living allowance of 1/2 the inflation rate. That retirement works out being comparable to a 4% annuity on $1.125 million. That is comparable to many private retirement plans offered during the 60's through the 90's where my service years were. My retirement contribution, invested at 4% through that period would have been in the neighborhood of $490 thousand now, so the government share is 56% of my retirement or about $635 thousand. Certainly good benefits but not in the millionaire range.
Also, since the Reagan years, Federal employees have been on social security+a small annuity + a thrift savings plan (matched up to 5% of contributions by the government). Again, this is comparable to private plans.
Further, in our agency, in the Clinton years, our workforce was cut by 33%. This was done through buyouts and attrition but the government can and does cut workforce (and should do more of it - in fact whole agencies and departments could/should be cut).
Finally, it is possible (and likely no more difficult) to fire Federal employees as it is in any large corporation. Rules (many/most of them government enforced) apply to both entities. The too-hard-to-fire myth is really a too-lazy or too-non-confrontational reality on the part of too many government managers. I know I was better at it than the New York public schools
University professors have a high degree of learning and once a prof the rigorous demands of teaching and publishing.
Not necessarily. My husband's father is a retired English professor who taught at a 4th-rate Pennsylvania college. He did no research. He was a glorified high school teacher who was tenured and unionized. Why does a professional like that need a union?
He and other profs wouldn't move to better schools because they would have had to take a pay cut. I'm sure the taxpayers of Pennsylvania are happy to overpay liberal arts professors because it's not like you can't find a PhD in English on every street corner.
PS I took my BA in English to work in the private sector. My taxes pay people like him.
This article and the one referenced are both full of it. Show me a teacher retiring at 50 -- my father is 64 and still working. He will not be a millionaire when he retires either, and he made a decent income his whole life. No evidence, of course, that these people are becoming millionaires, just a bunch of evidence for how much people would have to be paid.
It is really unimpressive to hear people calling others parasites. Government employees pay taxes just like everyone else, and are generally far more educated than private sector counterparts. Let's not let a little fact cloud your talking points though.
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