Comment by fbonetti | Hacker News Reader

Comment by fbonetti | Hacker News Reader

Parent Full thread

This doesn't tell the whole story. In states like Illinois, the pension assumptions were unrealistic to begin with. From what I've read, they assumed 7% annual growth and included 3% annual increases to account for inflation. Even if government officials had property invested the funds, we still would've ended up with a massive shortfall compounded over several decades.

Unions are incentivized to bargain for as much compensation as possible and politicians are incentivized to give it to them if union workers make up a significant chunk of votes. Politicians don't have to be concerned with whether or not those obligations are realistic because they'll be out of office by the time the whole thing falls apart.

"Unions are incentivized to bargain for as much compensation as possible"

Yes, they are. And companies are incentivized to bargain for as much profit and as little employee compensation as possible, yet people here seem to consider that a moral imperative. I cannot, and will not begrudge unions for trying to get the best deal for their members while that is the case.

The problem isn't so much that unions are incentivized to bargain for as much as possible. Every one who participates in the economy is trying to get the best deal for themselves. The problem is that politicians aren't restrained by cost. If a union demands that hole diggers be paid $100 an hour instead of $10 an hour, a politician will gladly give it to them even if it will bankrupt the state.

Edit: I think I should note that I'm specifically referring to unionized government workers.

That's entirely wrong; those politicians are still accountable to the voters.

>companies are incentivized to bargain for as much profit and as little employee compensation as possible

Not necessarily, especially when employees are in high demand. Netflix has done quite well by paying employees well above average in order to effectively have their pick of the talent.

Paying employees poorly can increase training costs, recruiting costs, cause negative customer perception, etc.

Reply on news.ycombinator.com