Clear Thinkers favorite Arnold Kling has had some insightful thoughts lately (see also here) about the economics of retirement lately:

[Megan McArdle’s] main point is that if you live about 90 years and spend the last 30 of them not working, it is hard to maintain your standard of living no matter who pays for it. There is a lot of optimism about stock market returns built into state pension funds, individual retirement plans, and–I would say–even Social Security and Medicare. My argument is that without strong stock market returns, general tax revenues are not going to be robust, and Social Security and Medicare will go broke really soon without robust general tax revenues. [. . .]

For any given level of output, more consumption by one group (say, people over 65) is going to reduce what can be consumed by everyone else. As the ratio of people over 65 to everyone else goes up, this increases the ratio of state-confiscated income to total income required to keep Social Security and Medicare going. [To some] this higher confiscation rate represents a kinder and gentler society. But it may not feel kind and gentle to those who earn incomes and have them confiscated.

Kling’s thoughts resonate when reading this WSJ article on teacher’s pensions:

When it comes to shaking up the status quo, however, the most potent education reform may be the one that’s too often considered a side issue: pension reform.

That’s right, pension reform. Over the past 25 years, the private sector has moved from having four of five workers in a defined-benefit pension to having just one of five workers in such a plan. Mostly this means a shift to 401(k)s and the like, where payouts are related to what employees pay in.

Like most government employees, teachers have not made this shift. Their unions fight bitterly to retain the defined benefit plans underwritten by taxpayers. While these plans allow some lucky folks to retire in their 50s with a generous payout, they also feature perverse incentives that punish the young (more on this below) and encourage people to hang on for dear life even when they’d much rather leave. [.  .  .]

"A retired teacher paid $62,000 towards her pension and nothing, yes nothing, for full family medical, dental and vision coverage over her entire career," said [Governor Chris Christie]. "What will we pay her? $1.4 million in pension benefits and another $215,000 in health-care benefit premiums over her lifetime. Is it ‘fair’ for all of us and our children to have to pay for this excess?"

The article goes on to point out that the unintended consequence of these subsidized pensions is that – similar to the dynamic of employer-based health care policies – employees lose the incentive to pursue different and potentially more fulfilling careers because of fear that they will lose their non-portable benefits if they change jobs.

Does it really make sense to reward employees who simply wait out the system for the pot at the end of the rainbow that the rest of us cannot afford to provide?