Public Pensions are Going to Disappear

In local elections last week, voters in San Diego and San Jose voted to cut the pensions of city workers to help balance the budget. The votes weren't close; the cuts were approved by 66% and 70% of voters. You can expect a lot more of this in the years to come.

As we live longer, the cost of early retirement gets ever greater. Police officers and firefighters in San Jose could retire after 30 years with pensions worth 90 percent of their salaries. There may be good reasons for this; maybe the city doesn't want a force made up mainly of 60-year-old cops. But these provisions seem absurdly generous to middle-class people in the private sector who will have to work into their 70s before their 401k's will provide a decent living. American voters simply will not accept that retirement at 55 is a right, no matter what anyone was promised.

This means that the character of work for the state will change. People used to take government jobs because of the stability and the promise of a decent pension at 55 or 60. Early retirement is going to disappear, because it is expensive and because the voters won't accept it. That may mean that governments will have to pay higher wages to get the workers they want, which will mute the budget savings. In the long run I suspect government work will become more like private sector work, with less security and more scrambling, and a big problem of what to do with older workers who are getting less productive but won't retire because they can't afford it.