My New "Favorite" Blog
Apparently, someone phoned the NYT and complained about their liberal economist because all of a sudden the Chicago school is getting equal time.
I am simultaneously tickled and horrified.
A recent article in the New York Times describes how some civil servants are exploiting a loophole in the system to bump their pension packages. It's the result of a poorly-written rule that the city should change, and they should retroactively reduce the pensions of those who've exploited it.
That, of course, isn't what Economix writer Edward Glaeser sees. He prefers to spin a tale of government hiding the details of compensation plans in order to fool taxpayers and balance their budgets with smoke and mirrors.
But let's consider it this way.
Suppose you are a business, and you are focused on long-term growth and profitability. Suppose further that your business is primarily service-oriented, i.e. it depends mostly on skilled labor. Now suppose that not only does the labor have to be skilled, but that you are going to bear the full cost of training* and that even once your new employees are trained, their experience is valuable--Valuable as in it saves lives.
In other words, suppose you're running a police force.
As an employer, wouldn't it make economic sense to defer compensation to the end of the employee's career, thus encouraging new recruits to consider the long-term when choosing to work for you? Wouldn't it be cheaper, in fact, to do it this way?
Glaeser, of course, doesn't consider that possibility and instead urges that New York use the same retirement plan as private employers, plans where the employee bears all the investment risk in providing for his/her retirement. Plans such as New York's, Glaeser says, "seem designed to bring about fiscal crisis after fiscal crisis."
Glaeser's irony detector must be broken. Blind trust in a self-regulating, perfectly efficient
markets (especially, but not only the stock market) created our current fiscal crisis and wiped out millions in retirement savings. He's engaging in the same smoke in mirrors: he wants to take the risk born by the city of New York, a large entities whose fiscal crises are noticeable, and shove it off onto individual retirees, whose fiscal crises are explainable as "poor planning" and ignorable for those who write policy.
*Replacing a police officer who has served for 3 years can cost as much as $58,000 according to some estimates.
I am simultaneously tickled and horrified.
A recent article in the New York Times describes how some civil servants are exploiting a loophole in the system to bump their pension packages. It's the result of a poorly-written rule that the city should change, and they should retroactively reduce the pensions of those who've exploited it.
That, of course, isn't what Economix writer Edward Glaeser sees. He prefers to spin a tale of government hiding the details of compensation plans in order to fool taxpayers and balance their budgets with smoke and mirrors.
But let's consider it this way.
Suppose you are a business, and you are focused on long-term growth and profitability. Suppose further that your business is primarily service-oriented, i.e. it depends mostly on skilled labor. Now suppose that not only does the labor have to be skilled, but that you are going to bear the full cost of training* and that even once your new employees are trained, their experience is valuable--Valuable as in it saves lives.
In other words, suppose you're running a police force.
As an employer, wouldn't it make economic sense to defer compensation to the end of the employee's career, thus encouraging new recruits to consider the long-term when choosing to work for you? Wouldn't it be cheaper, in fact, to do it this way?
Glaeser, of course, doesn't consider that possibility and instead urges that New York use the same retirement plan as private employers, plans where the employee bears all the investment risk in providing for his/her retirement. Plans such as New York's, Glaeser says, "seem designed to bring about fiscal crisis after fiscal crisis."
Glaeser's irony detector must be broken. Blind trust in a self-regulating, perfectly efficient
markets (especially, but not only the stock market) created our current fiscal crisis and wiped out millions in retirement savings. He's engaging in the same smoke in mirrors: he wants to take the risk born by the city of New York, a large entities whose fiscal crises are noticeable, and shove it off onto individual retirees, whose fiscal crises are explainable as "poor planning" and ignorable for those who write policy.
*Replacing a police officer who has served for 3 years can cost as much as $58,000 according to some estimates.