Pensions. Bring that up at a party and watch everyone’s eyes glaze over. It really is more exciting to talk about paint drying than about pensions and actuarial tables, but bear with me. Pension Ponzi by Bill Tufts and Lee Fairbanks is actually a mostly interesting book.
The book is actually about two core issues: public sector pensions and public sector salaries. The issues are intertwined, but actually are two different issues in my mind. Tufts and Fairbanks combine them and rant about both issues throughout the book, and repeat themselves many times in doing so. The book specifically analyzes the Canadian public sector pension and compensation system, but as far as I can tell, the issues apply to other countries as well.
The authors cite many examples–which I do appreciate–but make a crucial error in stating over and over that public sector wages are too high, without adequate comparative data. What is a police officer (or fire fighter, or military officer) worth? How exactly do you compare those jobs to any other profession to determine their profession. Simply stating they get paid too much or too little only works when you compare the salaries. The tough question is what do you compare them to?
Unfortunately, the authors don’t make any attempt to compare public sector wages to private sector counterparts. For example, they laud CEO salaries in Canadian government as being too high. But are they really? Maybe they are, maybe not. What is the CEO of a Billion dollar organization worth? In the private sector, s/he might be paid millions of dollars. So is $XXX,000 too much in the public sector? I don’t know. Maybe it is, but to simply say a salary is too high implies a comparison, and you must present the other side of the comparison to complete the argument. The authors don’t do so unfortunately.
Pensions are complicated and the authors to a pretty good job of explaining the issues and why they believe most pensions are in dire straights. Baby Boomers are living longer than expected. There are not enough Gen Xers and Millennials working to support the retired Baby Boomers. The market is volatile. All of these have created a perfect storm that may see many of our pensions go bankrupt without substantial changes to our system.
What does this have to do with leadership you ask? The pension issue is not merely an economical issue; it really is a leadership issue. Public sector leaders, corporate leaders and union leaders must all step up and address the simple fact that our public pensions may not last as they are currently structured. The pension issue has been at the centre of recent bailouts of GM, Chrysler and other major corporations. It is a major issue in government-union clashes in Wisconsin, California, and many other locales. Tufts and Fairbanks unfairly lay most of the blame for pension unsustainability solely on unions, but it takes two parties to negotiate. That can’t be forgotten. Political and governmental leaders must take both a short and long-sighted approach to this issue. Few leaders are able to do this, and ones that do may become the most important and influential leaders in the next couple decades. The pension issue will not go away quietly.
Overall, I did enjoy this book. It’s funny at times, wanders off track at others, but overall, addresses a mundane topic in an interesting way. They are very biased in their disdain for unions, but do raise many interesting facts and history about labour relations in Canada. I wish they spent more than 11 pages proposing solutions, but that may not have been their purpose in this book anyways. The book succeeds in bringing a complicated issue into everyday language, and out of obscurity and complicated language. It is an intriguing book for any leaders looking to reward their employees today but who also want to create a long-term sustainable future for the next generation of employees. Their (my) retirement future depends on those choices.
Disclosure: I paid full price for this book and have no connection to the authors. I also work in the Canadian public sector and contribute to a public sector pension.
Tufts, B. and Fairbanks, L. (2011). Pension ponzi: How Canada’s public sector unions are bankrupting Canada’s health care, education and your retirement. Mississauga, ON: John Wiley & Sons.