The Real Class Warfare is About to Begin: Non-Government vs. Government Workers

During the upcoming presidential race, we are going to hear more than ever about inequality and the division it creates in the US.  Virtually every candidate for the Democratic Party presidential nomination has talked about increasing taxes on the “rich” to reduce income and wealth inequality.  A few candidates have even proposed wealth taxes.

I have yet to hear a candidate talk about the real inequality in this country: the benefits and pay government workers earn versus the benefit and pay private sector workers earn.  Ohio is proposing adjusting requirements a government worker must meet to receive full retirement benefits.  A description of the proposed changes is below.

Under the changes under consideration, a new, non law-enforcement hire would have to wait until they’re 62 and have 35 years of service credit before they could retire and receive their full pension benefits. That compares to an equivalent new hire now, who has to work until they’re 55 and have 32 years of service.

Today, an employee of the state of Ohio that has worked 32 years and earned $50,000 a year can retire at 55 with a LIFETIME pension of approximately $35,000 per year.  A private sector worker cannot touch his 401k plan at the age of 55 (unless it is a hardship) but if he could, it would require a balance of about $880,000 to create the equivalent pension the government employee will receive.  Considering the average 55 year old has less than $200,000 in a 401k account, I’m pretty sure very few will achieve lifetime income of $35,000 in retirement.

Many municipalities and states have significantly underfunded pension plans.  I won’t even try to fathom the underfunding of healthcare plans.  These government entities have to raise taxes, cut benefits, or a combination of both.  It’s not going to be pretty when private sector workers finally realize a significant portion of their taxes go to funding retirement benefits of government employees.  That day of reckoning is coming soon. 

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