What justifies or is the reasoning behind not providing pension for one group of people as a good thing and the exact opposite for a different group of people all at the same time ?
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I don't follow. Why do you think they should give pensions?– user29681Aug 10, 2020 at 3:51
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4You are comparing a company (Private sector) to government (public sector)....I've voted to close as this just seems like a rant about your current situation.....– NoahAug 10, 2020 at 3:54
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1It is a matter of inertia. Private industry pensions used to be common. I get a few hundred dollars a month from my first employer.– Patricia ShanahanAug 10, 2020 at 3:55
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Noah - nothing to do with my personal situation. Request you keep an open mind. Genuinely curious. I know a person in govt that will retire around age 40 with a very high pension for rest of his life. Thought that was great for him and I think it’s ok to wonder why most people use to have pensions but now only govt employees mostly do.– ThinkerAug 10, 2020 at 3:59
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I see it differently. Why are government workers forced into pension schemes? The state retirement plan I'm familiar with takes 11% of your check to fund the pension. I guarantee I can invest that 11% better than they can. I'd happily forego the pension for a 11% raise. Same goes for social security.– acpilotAug 10, 2020 at 4:09
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2 Answers
Why do you think people in the US do not get pensions? Employer-paid pensions, although less common than they once were, are still a thing: https://www.pensionrights.org/publications/statistic/how-many-american-workers-participate-workplace-retirement-plans
The problem with employer-provided pensions is that they generally require people to stay with the same employer for decades before they become vested. This long-term employment is much less common than it once was, especially in the private sector, and particularly in tech where companies may be worth billions at one point, then be out of business a decade later. What happens to employee pensions then? (There is some insurance, but it's not perfect: https://www.pbgc.gov/about/faq/pg/general-faqs-about-pbgc )
This is why defined-benefit pensions have largely been replaced by defined contribution retirement plans such as 401(k)s and IRAs. These are portable - your 401(k) money moves fairly easily when you change employers, and the future payments don't depend on the employer(s) staying in business.
And of course, at the base level there is the Social Security system.
Employers and employees negotiate a pay package which can consist of a mix of piecework or hourly, daily, weekly, or monthly payments, deferred future payments from pensions to stock options, health plans, and other benefits.
- At one extreme, it is "mow this lawn and you get $10, but there is no promise of any sort for the future."
- At the other extreme, it is "work here for 40 years and you get monthly payments, health coverage, and a pension after retirement."
A rational jobseeker looks at the present and future value of the pay package. The value of cash in the hand is clear. The value of health coverage can be found on the insurance market. The value of future payments is more tricky, it depends on assumptions about the nominal value when they come due, future inflation, and the likelihood that they payer will still be around when the payment comes due.
For the last part, the government is in the convenient position that everyone assumes they'll be around two generations from now, and that they are large enough to efficiently self-insure.
