Hacker News Reader

Comment by caymanjim | Hacker News Reader

I've spent much of my career as a software consultant. I usually make about 1/3 of my client billing rate. The rake is high. Part of that is normal overhead of employer-side taxes, benefits, expensable items (hardware, business lunches, continuing education), infrastructure/support (office space, office staff/HR/non-owner management). We can generously call that another 1/3 of the client bill rate. That leaves the final 1/3 to the company for profit and business development. There's nothing remotely unusual about this arrangement.

View on HN

Back when I worked for Boeing, the accounting figure was that it cost Boeing about 45% over and above my salary to pay for my benefits package and taxes paid on my behalf (things like health insurance, retirement plan contributions, the so-called "employer's contribution" of Social Security taxes, etc.).

This is why when one sees salary comparisons, they are misleading. A correct comparison would compare what is called "total compensation" which includes that 45%. For example, whenever you hear about public teacher salaries being low, no mention is ever made of the total compensation, which is pretty generous.

Those "free" benefits aren't free at all. They come out of the employee's pocket.

> For example, whenever you hear about public teacher salaries being low, no mention is ever made of the total compensation, which is pretty generous.

This is disingenuous. It's perfectly acceptable to compare teacher salary to any other salary. The default assumption is that you're comparing W2-with-benefits to W2-with-benefits. When people talk about low teacher salary, they're talking about it in comparison to another salary with the exact same overhead. It's not necessary to assign cash value to employer-paid taxes and benefits when making an apples-to-apples comparison.

It is not disingenuous because the public teacher benefits package is much better than typical in the private sector.

The teachers' unions have been quite clever about this, in negotiation for much of their pay in the form of benefits, so it looks like their pay is low. The newspaper, for example, often runs comparisons of salaries but never total compensation.

This is also misleading. Medical benefits are comparable to white-collar professional services jobs. Most teachers have payroll deductions to pay for a portion of their insurance. In 15 states where teachers receive pensions, they receive them in lieu of Social Security benefits. They don't pay into Social Security, and they don't receive Social Security upon retirement. They only receive their pension. If they don't work as teachers long enough to receive a full pension, they're losing out. Even if they switch to a qualifying job, those years of non-contribution to Social Security reduce their eventual benefits. Most states are phasing out pensions and replacing them with 403(b) plans, and/or making teachers contribute to the pension plans out of their salaries. Aside from insurance and retirement, teachers don't have nearly as many benefits and perks as corporate workers do.

Part of the reason teacher salaries are lower on an annualized basis is that they don't work during the summer, but considering that their salaries are already on the low side given the education requirements, that washes out.

I'm not trying to paint a sob story for teachers. They're usually comfortably middle class, and if they put in 20-30 years, they're usually retiring comfortably. But you're making it sound like they have a benefits package above and beyond other employment. It's simply not true. Plenty of other jobs (and I don't just mean tech jobs) that require a four-year degree come with far better benefits, 401(k) matching, and you don't have to gamble on committing your entire career to staying in the same career in the same state in order to retain the value.

> But you're making it sound like they have a benefits package above and beyond other employment.

They do. The biggest clue is the difficulty in obtaining what the value of that benefits package is.

> put in 20-30 years, they're usually retiring comfortably

I find it amazing that one can retire comfortably at 42 if you're a schoolteacher. What other job in the private sector offers that?

> They do. The biggest clue is the difficulty in obtaining what the value of that benefits package is.

Because you can't find the value of the benefits, that's a clue that it's excessive? Teacher pay and benefits are 100% public information. Your earlier claim that teacher health benefits in WA were $36,000 per year is patently absurd. An ACA exchange medical plan available to anyone costs under $500/mo with an annual out-of-pocket maximum of $6000. The state may pay $36,000/year for their benefits (but no, they don't, not even close), but even if that were true, if you're comparing it to market value, that's worth $12,000 at most to the teacher.

> I find it amazing that one can retire comfortably at 42 if you're a schoolteacher. What other job in the private sector offers that?

I shouldn't even have claimed that they can retire comfortably. Quoting from [1]:

> For example, under a system with a 1.5 percent multiplier: A teacher retiring with a final average salary of $60,000 and 20 years of service would collect a pension of $18,000 annually.

Now this is a nice perk if you start at age 42 and live another 40 years, but it's not a comfortable living. It's barely over the poverty line. It's unclear from this example if it's in a state that excludes Social Security benefits, but even if it doesn't exclude them, that's not a lot of money.

From the same article:

> Across the nation, teachers pay on average 16 percent of the plan premiums for individual coverage, lower than the 21 percent average for workers in private industry. But for family coverage, teachers pay a comparable portion of the premium to private-sector workers, according to 2017 data from the Labor Department.

As I stated previously, most teachers already contribute to their health insurance, and as I stated above, the maximum value of that insurance is only $12,000.

Feel free to explore further on your own. I'm tapping out.

[1]: https://www.edweek.org/ew/issues/teacher-pay/index.html

Your figures are nice, but do not include what it costs per teacher to provide those benefits.

> Teacher pay and benefits are 100% public information

It's easy to find pay, but I haven't been able to find the cost of the benefits.

> I shouldn't even have claimed that they can retire comfortably.

I'd be interested if you can find any private pension plan that gives out anything at all starting at age 42 and going for the rest of their life (another 40 years). Even Social Security doesn't kick in until 62.

> most teachers already contribute to their health insurance

The figure of interest here is what does that cost the government to provide it?

My school districts budget book indicates total benefit costs are about 43% of total salary. (https://www.washoeschools.net/Page/550)

The published teacher pay schedule indicates that teachers are paid around $50k for a 9 month schedule (https://www.washoeschools.net/Page/841)

At 43% that's roughly $21500 in benefits. Health insurance for a family of 4 on an ACA platinum plan is ~$19000/Year (https://news.ehealthinsurance.com/_ir/68/20205/eHealth_2020_...)

Since not all teachers will have families or elect for district health insurance, I think it's safe to assume health insurance is probably around the $9000-13000 per person range to the district.

Note that Nevada has pretty low per student spending for the US, so it is quite possible other municipalities Will spend more. This seems to be the case (or my math is bad) as the BLS reports a much higher benefits to pay ratio for state and local government employees nationwide - about 60% (https://www.bls.gov/news.release/pdf/ecec.pdf)

Thanks for the figures!

Does it particularly matter? In most cases, people take whatever 'benefits' they're given - they don't have much leverage to take something else. Whether I want or need "great" health insurance, it might be something my employer provides, and would be part of my 'total comp'. It may not actually benefit me at all, and I have no choice in it. And likewise, if the insurance is crap, most people have no leverage to replace it with anything better anyway.

Most people can only make choices with the take home portion of salary, regardless of what 'total comp' is.

Im not sure what you are saying here.

Benefits absolutely play a role in the jobs people take. I have been offered two jobs with identical salaries, but one had a significant employer contribution to my 401k and stock options. you can guess which job I took.

Likewise, my mother was a teacher and one of the main reasons was the incredible healthcare. She could have gone somewhere else with her 2 masters, but it was worth a ton with a sickly husband. A full salary pension is worth a lot of direct salary compensation too.

I saw a figure once (they're hard to come by) that the value of the health insurance benefit for WA public school teachers was $36,000/year.

https://www.seattletimes.com/education-lab/with-a-price-tag-...

https://www.hca.wa.gov/about-hca/school-employees-benefits-b...

Those links provide facts and figures, but no figure on what the value of the employee benefit is.

I'd encourage anyone interested to ask their employer's HR dept what the value is of their employer provided health care benefit, and compare.

Yeah, my benefits are valued at $22,500 in Seattle at a Big Tech firm. I don’t have children so that impacts the value, but we have a very good benefits package and it’s still 1/3 less than teachers, if the numbers you cite are correct. My take home and stock are obviously ridiculously better than what I could expect as an educator, even with a Ph.D and the highest tier of experience (the CBA cap for non-administrators is ~$120k for the 20-21 school year in Seattle), so I have no regrets, but yeah HR calculates my benefits as considerably less.

And the value I cited was just for health care - not including the retirement and all the rest.

> Likewise, my mother was a teacher and one of the main reasons was the incredible healthcare. She could have gone somewhere else with her 2 masters, but it was worth a ton with a sickly husband. A full salary pension is worth a lot of direct salary compensation too.

Same with my mom. She was a SAH mom for 14 years and switched careers and went to grad school to be a school counselor and the career change was largely attributed to the medical benefits she’d get as an employee, which became necessary because my dad’s business was going under (she was also damn good at what she did). In addition to the benefits, the work schedule that would allow her to be home not long after I got home from school (I was 8 and my sister 14) and summer’s off made it a relatively good proposition.

Now, she has a Masters, a Specialist, and a Ph.D, so her salary was significantly higher than most teachers (and her state has salaries that are on the higher end as well as some of the best retirement options), but it still pales in comparison to what she can make in private practice.

She started late and retired a little early — I don’t think she hit her 25 years — but she still gets a very large percentage of her salary from her state and county pension. And she had the good insurance until she hit Medicare age.

For educators that start out younger, say 22, a common tactic is to do the 25 years, retire/collect retirement, and then return to work in some capacity, essentially double-dipping. The ability to do this is going to vary according to your state and county, but MANY of my moms friends did this. My mom even considered it before saying “fuck it” and enjoying retirement.

I won’t dispute that on the whole, teachers in the US are underpaid, but it’s one of the few places outside of the federal government that offers the level of benefits and retirement options that it does.

My parents live in the suburbs and take home six figures a year in retirement (her pensions and my dad’s social security), not inclusive of 401k or other investments. I very seriously doubt I’ll be able to do the same in 30 years, assuming I am even able to retire, even though my total compensation is probably close to triple hers at its peak.

> Does it particularly matter?

It sure does. It's a lot of money that pays for things like health insurance, early retirement, and retirement benefits.

> they don't have much leverage

Sure they do - the teachers' union aggressively negotiates for those benefits.

I upvoted you’re comments since they are accurate to my mother’s experience as a 33+ year elementary school teacher in CA. Her health care is similar to what my job provides, and then she gets a pension that highly incentives 35+ year career of continuous work in the same district. Any long term medical leave pauses pension credit, and moving to a different district within the same state can also mess with the pension terms.

Switching jobs 15 years in feels like an all or nothing situation since they haven’t been paying into social security.

I don’t know any teacher friends of hers that have retired before 30 years on the job. It’s stable, but it’s not an early retirement career.

Finally, I want to acknowledge that funding in CA for teachers is difficult to adjust and complex, but it’s all inherently public. https://ed100.org/lessons/whopays

Your link has many facts about sources of funding, but does not say what the value of the teacher benefits package is.

> retired before 30 years on the job. It’s stable, but it’s not an early retirement career.

I'd consider retiring at 52 early retirement, especially if it comes with a lifetime pension.

The median for retirement in CA is 61.9 years of age. Age factor plays a large role in setting pension, one cannot retire early without giving up a portion of the pension. The average monthly benefit is $4,088.

Here’s an idea of pension contribution

> Teachers contribute 8% of their monthly salaries into a state pension fund, while their employers contribute an additional 8.25%. On top of these payments, the state of California contributes another 2% into the fund.

All from https://www.teaching-certification.com/salaries-benefits/cal...

Thank you. So that gives the cost of the retirement plan at 10.5% of salary. The link, unfortunately, does not give what the cost of the healthcare plan is (or other benefits).

Your link also says they can retire at 50 with 30 years of service. Sure, it's not the full pension, but they'll still be receiving the pension for another 30 years. Seems generous to me.

I don't know a private company with a plan like that. SS doesn't start paying out until 62 (also at a reduced amount).

The article doesn’t say Andelans think only making 1/3 of their billing rate is unfair. It says they don’t make 1/3rd of their bill rate but the company perpetuates the fallacy that they do. It both makes Andela’s pay scheme seem more generous than it is while creating social misconceptions about how well off Andela’s workers are.

A one person small business and a corporation on the size of Andela simply can not be compared at any level.

Reply on news.ycombinator.com