Schieber said he is sympathetic to the situation in which many public sector employees find themselves, but government options are few when they are so starved of revenues they can't deliver on yesterday's unfunded promises. "I find it hard to figure out how to avoid the fiscal pincers that are closing in on some of these jurisdictions," he said.
"The current fights over retirement plans and health care are a generational issue and it has distinct implications in the context of workers realizing the 'American Dream' of each generation doing as well or somewhat better than the one that preceded it," he said. "We need to step back and look at the retirement system from a somewhat different perspective than that it served our parents well so it should also serve us well and then our children." he added.
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In his book, "The Predictable Surprise: The Unraveling of the U.S. Retirement System", Schieber demonstrated the generational shift by studying the data on various facets of retirement and health benefit plan costs for workers stated as a percentage of their lifetime earnings. For workers retiring in the 1950s, typical retirement age would have have been around age 67 or 68; for those retiring in the mid-1980s, it would have been in their low 60s and it's around 63 or so today on average.
Schieber said that when his father retired in the mid-1970s, his lifetime costs of financing his retirement and health benefits would have been around 15 percent of his lifetime earnings. For someone reaching their mid-60s in 2011, it would have been around 31 percent of lifetime earnings. The benefits as a percentage of preretirement earnings for the two generations are similar.
When you put that in the context of the American Dream, it means that people coming to retirement today have had 15 percent less of their lifetime earnings to do other things to meet their needs and "get ahead" than the earlier generation because of the higher retirement and health costs they faced.
"I think the public's perceptions of the arithmetic of realistic retirement financing is finally becoming sufficiently clear that people are simply saying public sector workers do not get to continue enjoying what the rest of us can't have because we simply cannot afford it if we want to have anything else left to try to get ahead," Schieber said. "These trends already have some built-in momentum that means they will be even higher for my son's generation than they have been for mine," he added.
Shires said that for every police officer working on the street we now have two in retirement and that is a typical example of the huge burden the public finance system faces. The story in California has set the national standard in terms of generosity of benefits, but across the nation, local jurisdictions are facing similar issues.
Shires said it is possible that the time will come when the high costs of these commitments exceed both the public's willingness and ability to pay. "When that happens, new norms will have to be established. ... The numbers are large, and it is prudent for public employees who find themselves in today's generous circumstances to seriously consider locking themselves into their current 'deal' by retiring," he said.
—By Eric Rosenbaum, CNBC.com