Police, Firefighters, And Their Salaries, Ctd

by Patrick Appel

A couple readers made this point:

Conor's recent post "Police, Firefighters, and their Salaries" highlighted an interesting issue, and one I'm inclined to agree with him on.  However, I wanted to point out one area where I think Dan Foster and Conor were both more than a little misleading.

You quoted Foster as saying "average total compensation for an officer in Oakland a city in which the median family earns $47,000 is $162,000 per year."  While I don't know for sure, my guess is that the $47,000 figure is not "average total compensation", but in fact is simply salary/wages.  As you yourself pointed out, a big portion of police and firefighter compensation is pensions, but I am highly doubtful that pension costs are included in the $47,000.

I write only because this happens to be one of my pet peeves.  I am an actuary in the pension field, so I think it's fair to say I know more about pension accounting than most people. Lately it has become fairly popular to blame public pensions for most if not all of state and local fiscal problems, rather than the criminal financial management of those pensions by state officials.  When a politician decides to cut taxes by ending all contributions to the state pension fund, and then 20 years later the pension is only 20% funded, this makes the pension fund look like it's costing the state lots and lots of money, when what really happened is that the state started borrowing money from the pension fund and now has to pay it back.  Meanwhile, the lack of return on assets (which is supposed to counterbalance the service and interest costs associated with pension plans) makes the accounting "cost" of a pension much higher than the actual value of the pension benefits.

So the 162,000 figure includes the "cost" of a police officer pension, which is too high, and is being compared to the median salary/wages of the median family (i.e., a number that doesn't include the cost of pensions).  This isn't comparing apples and oranges as much as it is comparing apples and filet mignon - they're not even in the same category

Another reader highlights a problem with low paying police jobs:

Back in the 70s, it was a well known fact that Hong Kong policeman made little but managed to eke out a living by being paid under the table by local businessmen and gangs. I prefer that the state pays my local cop rather than local mob types. The $125k?  It's for hazard pay.

Another reader agrees with Conor:

This has baffled (and irritated) me for years.  I worked for the campus fire department when I was in college.  On occasion, we'd help the City FD administer physical tests for prospective firefighters.  Without exception, there would be 500 applicants for one position (the other two top finishers would be placed on a list for future openings).  And it was "only" 500 because the city stopped accepting applications at 500--there were always thousands of applicants seeking one open position.  These folks traveled the state, testing at every agency for every opening.  That was 20 years ago but I don't think it's changed.  If there's any indication that these folks are overpaid it's the imbalance of supply and demand.  You could pay firefighters a fraction of what they currently receive and still have an ample supply of qualified applicants.

Jonathan Cohn took on this topic a couple weeks back. His main point:

To what extent is the problem that the retirement benefits for unionized public sector workers have become too generous? And to what extent is the problem that retirement benefits for everybody else have become too stingy?

I would suggest it's more the latter than the former.