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Tuesday, November 01, 2005

The end of pensions?

honestpartisan linked to this New York Times article which I almost commented on yesterday, but as he had asked specifically for comments from Greg at Generic Confusion who has actual expirience in the field. He has responded brilliantly, here, here and here. There are a couple of things I would add. I expect that we will see more, not less, job turmoil in the coming decades. Changing jobs will continue to be frequent and entire industies will probably appear and disappear. There are few present companies that we can guarantee will still be around 50 years from now and very few people who will retire from the job they start at, even if they keep the same career. On balance, this is a good thing. Dynamism means we are finding better and better ways to do things and that means everyone on the whole is better off. Relying primarily on retirement plans that promote this is much better than on pension plans designed for long term careers. The article mentions that issue, and tries to rebute it, at least for some employees:

But while mobility is generally considered a virtue in the modern economy, it isn't appropriate everywhere. It may be desirable for a software engineer to move from job to job, notes Robert Walton, a Calpers assistant executive; "for teachers, firefighters, nurses, engineers, that isn't the type of work force you want." Stability is a virtue. The trick is to force legislatures to commit to funding with the same zeal with which they commit to benefits.
For the most part, I find this unconvincing. While we may want teachers, firefighters, nurses and engineers to remain in their careers, I don't know that we have any particular desire for them to remain with the same employer for 50 years. Particularly given the chances that they may have a spouse who would benefit from mobility. There is of course one glaring exception to this. The military benefits greatly from a 'stable workforce,' indeed it is our professional NCOs that form the core of our military and a generous pension system is very beneficial at preserving that. Since the military has no real competition, there is nothing to be gained by mobility for these workers. A few other federal jobs are similar, although not to the same extent.


Blogger Greg said...

To make things clear, I don't work in pensions myself. I just learned about the subject from the normal background that comes from the exam process.

11/01/2005 08:26:00 PM  
Blogger Dave Justus said...

You work in the field of financial retirement planning correct? As an actuary? I could have made that more clear, nevertheless I think that very relevant expirience and your posts show that.

11/01/2005 10:52:00 PM  
Blogger Greg said...

I am an actuary, with experience with a variety of products, but that's not what most people think of when they hear "financial retirement planning." I know more about how products work in general than in how a particular person's retirement needs can be met.

11/08/2005 10:12:00 PM  

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