Oprah episode about poor spending habits in the US

[the-royal-mail]

Did anyone catch that episode yesterday? I start work very early in the morning and thus arrive home early enough to catch this. Some pretty scary stories of average joe financial mismanagement in that show. The number 70% was thrown around in the show, relating to people who are in debt, or overextended? Can't remember exactly but it was quite interesting, assuming those stories are true. The people with these money issues were all successful working class married couples with good incomes.

I think the main problem is people don't seem willing to say NO to all these offers and spending opportunities. It's like people get a buzz on all this stuff. The one woman spent 1 of 4 waking minutes talking on her da-n cell phone! This costs money!!!

According to what I gathered from the show, the majority of the population does not know how to properly manage their money. I am quite aware of that, so how do we fix it? All 32 million of us can't attend the Oprah show to get help. I think we need to reconfigure our educational systems to teach our children the things that really matter. Instead of wasting their time in high school with othello and complicated mathematics that most will never apply in their lifetime, why don't they have a class that teaches high school students all about money management? Teach them how to invest, manage, save, plan for death and retirement and to scrimp when times are tough. These are the life lessons that come with experience, but we could avoid the disastrous consequences suffered by people like Oprah's guests by having a good money management class/foundation early in life.

Anyway those are my initial thoughts. Anyone else catch this show? Discuss.

[Four Pillars]

I guess I missed that episode. ;)

Nothing wrong with watching Oprah for entertainment, but that kind of show is the last place I would get any kind of information on any topic at all.

[bean438]

I happened to come across the show last night while channel flipping.

The first family? OMG 7K a year to get your hair done? The whole family eats out all day?

The other 2 weren't much better. I really dont feel sorry for these people at all.

I max out my RSP and TFSA. Mortgage will be paid off when retired.
Bills are all paid on time.

If I want something and I have cash i buy it. If I want something and I dont have the cash to buy, then I dont buy it. Period.

Seems pretty easy to me, and I didn't need an "expert" to tell me how to do it. I can thank my parents for that.

[HaroldCrump]

The first family? OMG 7K a year to get your hair done? The whole family eats out all day?

The other 2 weren't much better. I really dont feel sorry for these people at all.I watched Michael Moore's Capitalism: A Love Affair recently.
He portrayed several American families that had lost their 20 to 30 year old homes to the mortgage refinancing crisis.
He appeared to lay the blame on the doorsteps of the banks, brokers, and Mr. Greenspan who jointly egged on these people to re-mortgage their family homes that had already been paid off or close to being paid off.
Then they took all the new mortgage money and spent it all away - on consumer goods like cars, electronics, vacations, lifestyle, etc.

While the banks, Mr. Greenspan and all the other "parasites of society" certainly own some of the blame, I wonder what were these people thinking?
Did it not occur to them even once that re-mortgaging a paid off home and blowing away all the money is not such a good idea?
There was no little voice in their head that told them to stop?
Most of the families profiled were low-to-middle income deep southern or mid-western families - traditionally the population belts that are expected to be more fiscally conservative.

I can only guess that it must be the lure of "free" money that made these people throw common sense out of the window.
And as they are now finding out, there is no free money.

[the-royal-mail]

I sense that people are not able to see past marketing and hype. I also sense that parents are not teaching their kids how to say 'No' to things. Lastly, our society conditions people to 'go with the flow' and don't be a stick in the mud etc.

My mom taught me at a very young age to work for my money, keep it in a savings account to monitor the balance and only to spend money on the really important things. When my friends were all at the corner store buying candy and other treats, I was being urged/steered to save. I hated it. But it turns out my mom was right. Today, those skills I learned at the age of 10 are invaluable as they carry me through the financial ups and downs of life.

Why isn't every parent doing this? Why aren't there more people like Suze Orman and the like lobbying the gov't to educate (in schools) young (and old) people how to manage their money? That would be one lobby effort I could actually support.

People need to think for themselves.

[Doug Out West]

I don't believe education in schools is the answer. Was it taught to your parents in school? My parents were very frugal with their money having lived through the depression on a farm on prairies. My in-laws on the other hand were always about instant gratification. Even though he was at general Manager level and had to manage million $ budgets for his employer they were incapable of not spending money.

While one planned for an inheritance, the other stated he wanted to die with a dollar in his pocket.

I think its a moral question. You can teach the mechanics of how the system works its hard to teach morality.

Morality isn't the right word but can't find word that fits.

[Jungle]

I sense that people are not able to see past marketing and hype. I also sense that parents are not teaching their kids how to say 'No' to things. Lastly, our society conditions people to 'go with the flow' and don't be a stick in the mud etc.

My mom taught me at a very young age to work for my money, keep it in a savings account to monitor the balance and only to spend money on the really important things. When my friends were all at the corner store buying candy and other treats, I was being urged/steered to save. I hated it. But it turns out my mom was right. Today, those skills I learned at the age of 10 are invaluable as they carry me through the financial ups and downs of life.

Why isn't every parent doing this? Why aren't there more people like Suze Orman and the like lobbying the gov't to educate (in schools) young (and old) people how to manage their money? That would be one lobby effort I could actually support.

People need to think for themselves.

I don't know if it's really parents, although teaching and learning at a young age should have a positive benefit. I was not really taught anything, but at a pretty young age I was stashing bills in those glass peanut butter jars and hiding it lol.

To comment on Oprah, I did see a show on money. I also saw another show after it, about how every women needs five types of shoes. :confused: Stop spending money-spend money. :D

[MoneyGal]

lol about the peanut butter jars and the Oprah hypocrisy!

FWIW expensive items of clothing are routinely characterized as "investment pieces" by womens' magazines. ORLY? I'm building a diversified portfolio of ... clothing? :rolleyes:

[dilbert789]

My family and I were talking about this yesterday. In highschool I can only remember a couple classes in home economics that actually had to do with money, we did WAY more classes where we baked cookies... the point was brought up that it should be the parents responsibility to teach budgeting skills, but a lot of parents can't grasp the concept of teaching right from wrong or don't do drugs or don't break the law or ... Also, how can they teach it if they don't have a clue what they are doing either?

[MoneyGal]

But...how hard is it, really, to instill the basic message? Here (http://consumerist.com/2007/04/snl-skit-dont-buy-stuff-you-cant-afford.html)'s a funny take, well worth watching (from Saturday Night Live).

[Toronto.gal]

To comment on Oprah, I did see a show on money. I also saw another show after it, about how every women needs five types of shoes. :confused:

Didn't you know that some women are shoe & purse-aholics?! :rolleyes:
I was at Harbourfront a couple of weeks ago and had to laugh at how many women I saw strolling along the boardwalk wearing expensive, high heel stilettos, no way they were even comfortable. Speaking of purses:

"Rent Online Designer Handbags by Chanel, BE & D, Coach, Tracy Reese, Gucci, Botkier, Fendi, Louis Vuitton, Prada and More...
Sex and the City - Apparently, what women want today - are what these gals have got! Especially when it comes to what designer handbag you carry, the shoes you strut around in, and how stylish you choose to accessorize your total look with! Guess what? You can have it all! Savvy women are doing it up right, with a little financial creativity!...."

'Savvy women; financial creativity', eh? What's the world coming to?? :confused:

I didn't see the Oprah episode in question, but have seen other versions and IMHO, such individuals are just irresponsible spenders with too much time on their hands. I wonder how people managed their lives before all the advice shows came along - Oprah, Dr. Phil, Supernanny, Dr. Oz, Naked Chef, What Not To Wear, etc., etc. Have some people lost all common-sense about basic rules of life?!

MoneyGal, thanks for the video. :)

[the-royal-mail]

Common sense is out the window in a society that is driven by financial/lobby interests. All these junk vendors and $ lenders would be quaking in their boots if everyone suddenly started thinking for themselves and properly managing their money!

Parents or schools, either or both, someone has to teach kids this stuff. But because it's not happening, those kids grow up and pass on this irresponsibility to their kids. And so on.

[Addy]

why don't they have a class that teaches high school students all about money management? Teach them how to invest, manage, save, plan for death and retirement and to scrimp when times are tough.

Or even the basics.... I found in school I learned nothing about budgeting, money management basics... nada. More would be better, but for crying out loud, why not teach kids the basics? Most kids I knew had no clue how to open a savings account, or how to budget their (albeit small) allowance or income they did have!

[Addy]

I agree with what you're saying in principle, but the reality is, most people do not know how to do most of this stuff. So they can't teach their children because they don't know how to do it themselves.

I sense that people are not able to see past marketing and hype. I also sense that parents are not teaching their kids how to say 'No' to things. Lastly, our society conditions people to 'go with the flow' and don't be a stick in the mud etc.

My mom taught me at a very young age to work for my money, keep it in a savings account to monitor the balance and only to spend money on the really important things. When my friends were all at the corner store buying candy and other treats, I was being urged/steered to save. I hated it. But it turns out my mom was right. Today, those skills I learned at the age of 10 are invaluable as they carry me through the financial ups and downs of life.

Why isn't every parent doing this? Why aren't there more people like Suze Orman and the like lobbying the gov't to educate (in schools) young (and old) people how to manage their money? That would be one lobby effort I could actually support.

People need to think for themselves.

[MoneyGal]

Send them all to my Brownie unit. They all get their "managing money" badges, which involves opening a bank account, identifying financial goals (including savings), and learning about compound interest. :p

[brad]

I got an interesting insight into this from my stepdaughter: she told us frankly that she wants to spend fast and party hard now while she's young, because once she settles down and has kids she'll have to be more responsible.

The problem is that it's going to be a lot harder for her to break these early ingrained habits than she thinks. She went deep into credit card debt when she was just 18, and her paycheques are now being garnished by a collection agency (she was just throwing the bills away when they arrived in the mail). She cut up her credit card, and also learned the hard way that she cannot manage a cellphone contract responsibly, so now has a pay-as-you-go phone. But beyond those lessons she hasn't learned much: she goes on a spending spree the moment each paycheque arrives, and it's all gone in a few days.

I do get the feeling that more people these days live for the moment and don't think about the future; I don't know if people are pessimistic that there will be a future, or whether they just assume that they'll figure things out when they get there.

[Dana]

I use to be a credit counsellor with a non-profit credit counselling agency and it may have made me a bit cynical. I think that common sense is either innate or learned at a very young age - people for the most part either don't want to change, can't be bothered or just do not get it. There are exceptions, of course, but it is fair to say that the 80/20 rule applies: 80% of people in this situation will not choose to do things differently and 20% will change to some extent.

We live in the "information age" and there is plenty of resources and free information available for anybody who wants it. I don't have a lot of sympathy for the adults, but I do feel for the children.

[bean438]

Or even the basics.... I found in school I learned nothing about budgeting, money management basics... nada. More would be better, but for crying out loud, why not teach kids the basics? Most kids I knew had no clue how to open a savings account, or how to budget their (albeit small) allowance or income they did have!

They cant teach common sense money management because they are too busy teaching about masturbation, and how it is OK to have 2 mommies or 2 daddies.

Even the math they teach is crap. It is more important to understand what you are doing rather than to get the correct answer??????? WTF?

IF you understand what you are doing then shouldnt you get the right answer?

[K-133]

IF you understand what you are doing then shouldnt you get the right answer?

Maybe that's the premise - if they understand why, the probability that they will get the right answer will be increased.

Scientists want to understand how to fish and why to fish. Fishing itself isn't as important to them.

In Mathematics especially, its far to easy to teach your brain to be a calculator than it is to truly understood the principles. Think about how they teach you to memorize your 'times table'. Heck, even understanding that 3x3 = 3 + 3 + 3 is still a shortcut to the real reasoning behind it.

Keeping on topic - I'm a strong advocate that financial management is something that we should be teaching our children. School is about learning, and at these levels should be about learning in general. To argue whether school or parents are responsible for this is fairly irrelevant. It is clear from the issues of today, that the children of tomorrow will need to learn these things. This is how we better our society.

[Berubeland]

I agree with you Dana. I have seen this type of stuff over and over.

I have a friend who married a guy who inherited a house with a $100,000 mortgage. They have over the years downgraded their house three times every time increasing the mortgage & refinancing. They have now sold their house and rent.

A few days after I called her and the money is burning a hole in her pocket. She's at a sale and she want me to come over. I said to her I don't need anything why would I go shopping? She's like but you can get really great deals on stuff. I'm like but I don't need anything.

My math works like this

I spent 0$ on stuff I don't need

She spent a whack of money she didn't have to spend on crap she didn't need.

She also buys stuff off of TV all the damn time lol

I went to her house one day and she had bought this gadget to stretch your neck. It's a water bag you fill and you hang it over a door and you attach it to a collar around your neck and it stretched your neck. OMG I almost died laughing.

Through the years she has bought tons of exercise gadgets too. One time she bought a exercise chair to watch TV in. You sit in it and move your butt back and forth. The demonstrations on TV don't exactly do this chair justice. It's one thing to see a 20 year old slim gorgeous woman use this thing, it's another thing to see a 50 year old overweight woman huff and puff trying to show me how great her new gadget is.

So it's been entertaining watching the trainwreck of financial mismanagement. I talk to her about it sometimes but she just can't/won't change.

[the-royal-mail]

I continue to see episodes about this, regularly. It is astonishing to me the number of apparently sensible people with such poor money management skills. IMO the root to this problem is that our kids are not being taught about money. Obviously the parents don't know how to do it either.

But the most striking thing of all is that while many seem to understand they need to get their finances under control, they do not appear willing to give up the luxuries and spending that create the situation they're in. They seem unable to see the connection between their lavish spending and the financial disaster they created for themselves.

Kids need a good foundation in money mgmt, either from parents or school. Let's get this done! Why aren't people lobbying politicians for attention to this issue??

[MoneyGal]

People are actually lobbying Ottawa for the *reverse* - for increased CPP, even a doubling of the CPP. :mad:

[the-royal-mail]

That doesn't offend me as much because payouts are based on what is put in. Though I suppose that means we all pay more for collective user money mismanagement, it also means we would all collect more. As long as the benefits apply to everyone, not just fringe lobby groups of political interest to the gov't.

[MoneyGal]

(I apologize in advance, I have a huge bee in my bonnet about this.) The issue with increasing CPP payments is that we do NOT all collect more.

IF you survive past the actuarially-adjusted life expectancy for your cohort, you "collect more."

If you die before you reach that age, you do not.

What increasing the CPP payouts does is allow (or, you could use the word "force" - it is likely more appropriate) everyone to manage their longevity risk in a particular way. So everybody gets longevity-risk protection at relatively low cost, although some fragment (and you'd be surprised how large it might be) will die without seeing an amount that even represents a return of their premiums on a non-FV basis.

I have a huge issue with this. I am not OK with mandating a system that says "for the good of all, and because some people can't save effectively, we are going to take (more) money out of your pocket each and every year. Oh, and your employer has to chip in, as well. And if you were counting on investing those funds to leave a legacy for your spouse or child or favourite charity - or even just maintaining your OWN control over those funds - well; too bad."

I sincerely believe the existing public pension system is adequate.

[Ben]

I'm not sure I like the proposed increase to CPP.

For low income people at age 65, 3-legged CPP/OAS/GIS guarantee does a great job of keeping food on the table and meeting basic needs.

For high income people in retirement, those who were smart enough to parlay that income into high net worth do just fine. Those high income folk who retire without a high net worth get no sympathy from me.

For the middle-class who chose a sustainable lifestyle, and stuck a bit under the mattress here and there, kudos. CPP/OAS will top you up very nicely. For those who chose a lifestyle they could not afford, and experience a lifestyle step change on retirement, the scarcity hangover resulting from your overconsumption during your working careers is not the government's (read: fellow taxpayers) responsibility.

All of this is painting with broad strokes I know, but I think people need to sleep in the bed they make.

[andrewf]

"Those high income folk who retire without a high net worth get no sympathy from me."

But they are getting their GIS and OAS from you, which is better than sympathy.

I'd rather see OAS scrapped and CPP modified to ensure people who have sufficient incomes during their working years don't receive GIS. OAS is insane--we're giving money without clawbacks to couples with retirement incomes up to $130,000. Positively bonkers. This is effectively a doubled CPP already.

[MoneyGal]

No high-income person is getting GIS in retirement. GIS is essentially for people who have NO other income in retirement. GIS is fully clawed back when you have income of about $16,000 per year.

Yes, OAS is essentially welfare and yes, it essentially provides a doubling of the CPP already.

[HaroldCrump]

(I apologize in advance, I have a huge bee in my bonnet about this.) The issue with increasing CPP payments is that we do NOT all collect more.

IF you survive past the actuarially-adjusted life expectancy for your cohort, you "collect more."

If you die before you reach that age, you do not.That is true of any DBP plan - why do you take issue with CPP particularly?
Unlike OAS, CPP does not come from general tax revenues.
By your logic, we should not have OTPP, HOOPP, OMERS and all the other gold-plated federal, provincial and private DB plans either.

And I do not agree with equating the spending habits of all those US folks on Oprah with increasing CPP (not that I am one of those lobbyists in favour of forced increased either).
Even folks that have been frugal during their working lives and have saved diligently may (and do) need a strong CPP to be around.
Not everyone has the skills, time, risk profile, etc. to invest their savings on their own into stocks, mutual funds, etc.
The pathetic results of mutual funds speak for itself.
Such folks would like the CPP board (or some board other than a private mutual fund) to manage their investments in a way that provides guaranteed income during retirement.
Particularly, after the stock market crashes of 2008 - 2009, a lot of people have lost patience with investing.

The issue you raise about unfair benefits between those that kick the bucket early vs. that that live into the Guiness Book is inherent in any DBP plan.

The other huge disparity today (esp. in Canada) is that between the the gold-plated DBP haves and have-nots.
It is not about one's frugality or propensity to save.
All else being equal, a gold-plated DBP haver vs. a DIY RRSPer could be large in retirement.
The RRSPer does not have any longevity protection.
Annuities are expensive, depending on current age and prevailing interest rates.
There is also an intangible difference between having to "worry" about retirement and a large part of that "worry" taken away by the pension plan.

It is simply not a level playing field right now.
I am not in favour of forced increased in CPP premiums either, but for most DIY investors, it is not a fair situation either.

[MoneyGal]

HC: I agree with you perhaps more than you know.

My issue with a mandatory increase in CPP is that it is mandatory. I am not affected by increases in a DB pension plan.

However, if the (federal government + at least seven provinces with at least 2/3 of the Canadian population, if I remember the amending formula right) agree to increase the CPP, then I have NO choice but to participate, and neither does anyone else - your employer, my employer, everyone in the workforce (earning at least $3,500 per year).

My logic does not suggest that OMERs and HOOP etc. should no longer exist. DB pension plans are part of the total compensation for an employee and each employee chooses their participation in that plan by wit of their employment in the PS. This is completely different than a mandatory plan to which I and my employer must belong.

If enough people annuitize (i.e., purchase annuities privately), the prices will come down (you would be surprised at how little difference interest rates make).

And I'd be fine with a voluntary pension-style fund like Australia's superannuation funds - but without forced participation, all annuity-based plans will be effectively the same price; so this doesn't reduce the cost to annuitants.

If people cannot stomach stock market losses, the answer is VERY simple: save more, and save in guaranteed vehicles.

If I add a smiley here will this message seem less aggressive? :confused: I am not trying to be overly argumentative.

[MoneyGal]

The other huge disparity today (esp. in Canada) is that between the the gold-plated DBP haves and have-nots.
It is not about one's frugality or propensity to save.
All else being equal, a gold-plated DBP haver vs. a DIY RRSPer could be large in retirement.
The RRSPer does not have any longevity protection.
Annuities are expensive, depending on current age and prevailing interest rates.
There is also an intangible difference between having to "worry" about retirement and a large part of that "worry" taken away by the pension plan.


Coming back to say a rational person (which must be the starting point, if not the ending point, for any financial model) will include the presence or absence of a pension plan in their decision about whether to take a job or not.

Pensions are part of total compensation. Why are you suggesting that it is "not fair" that someone who works for a total compensation package of (say) $60,000 does not have the same retirement income/capacity to save as someone who earns (say) $90,000, when a portion of that $90,000 is delivered via pension entitlements?

People may not understand the true value of a pension, and the discrepancies between public and private sector jobs may be large (or not), and the state of California may actually go bankrupt paying for its police and teacher pensions - but these are all second-order arguments. People who have DB pension plans have a safer retirement because they have total compensation that includes longevity protection. People who want that kind of protection need to either work in those kinds of jobs, or rationally arrange their affairs to provide those benefits for themselves.

/rant

[Ben]

The OAS clawback threshold is going to plummet drastically, if politicians have any courage. Governments are going to be faced with too many spending challenges to continue handing out this free money to every Tom, Dick and Harry.

If you don't need it, you won't get it.

[HaroldCrump]

MG, you didn't come across as argumentative at all.
I think this is a good and healthy discussion.
And I personally don't like smileys either - they are like forced laughter on those "comedy" shows on television.
Coming back to say a rational person (which must be the starting point, if not the ending point, for any financial model) will include the presence or absence of a pension plan in their decision about whether to take a job or not.

Pensions are part of total compensation. Why are you suggesting that it is "not fair" that someone who works for a total compensation package of (say) $60,000 does not have the same retirement income/capacity to save as someone who earns (say) $90,000, when a portion of that $90,000 is delivered via pension entitlements?Agreed that while considering a job offer, a job seeker has to take all aspects into consideration like pension benefits, type of pension, RRSP match etc.
However, there are only so many public sector jobs.
You are making an assumption that for the exact same job duties, the private sector total package is the same or better than that in public sector.
In some professions that assumption may be true and in others, not.
During certain times (such as the heady days of dot com), that assumption may be true and at other times, not.
Over a period of 30 working years, the compensation between the public sector guy and the private sector guy may be a wash, but where the public sector guy wins out is in the post-retirement benefits.
Of course there are private sector jobs and positions that pay sums of money that are never possible in public sector, even at the highest levels.

This situation is similar to how the employer health benefits work in the US.
For most people above a certain age (say 50), the health benefits provided by the employer is the single most important factor when considering a job offer.
A 58 year old friend of mine in the US accepted a job offer than paid less than 50% of her previous salary but had a significantly better health plan than her previous job.
That is because (as I'm sure you are aware), getting that kind of protection on your own is prohibitively expensive.

Back here at home, the non DBPer is faced with some serious challenges in terms of retirement planning - (a) longevity protection (b) guaranteed income (c) inflation protection, to name the top 3 on my list.
Just like the health benefits in the US, it is technically possible to attain all of this on your own, but how many actually can?
And it is not simply about having a frugal lifestyle.
I think this is where CPP comes in and provides a bedrock.
Expanding the coverage of the CPP (and we can talk about how and what) will provide those 3 things to those retiring without a GP DBP.

[andrewf]

No high-income person is getting GIS in retirement. GIS is essentially for people who have NO other income in retirement. GIS is fully clawed back when you have income of about $16,000 per year.

Yes, OAS is essentially welfare and yes, it essentially provides a doubling of the CPP already.

A high income individual (during their working years) that didn't save will have no other retirement income, and be eligible for GIS.

[MoneyGal]

No, because it will be clawed back by CPP. You can't get the max GIS, the max CPP, and the max OAS at the same time.

If our fictional high-earner who did not save gets the max CPP (which is right, right? they were a high-earner), they get $11,200 per year - and then another $6000 or so from OAS. At that level of income, they get NO GIS.

GIS is pretty much only for people who have no or very little CPP.

[CanadianCapitalist]

No, because it will be clawed back by CPP. You can't get the max GIS, the max CPP, and the max OAS at the same time.

If our fictional high-earner who did not save gets the max CPP (which is right, right? they were a high-earner), they get $11,200 per year - and then another $6000 or so from OAS. At that level of income, they get NO GIS.

GIS is pretty much only for people who have no or very little CPP.

That's not true. A single pensioner earning $11,200 per year in CPP benefits will receive monthly GIS of $187. The combined GIS + OAS will be $705.

http://www.servicecanada.gc.ca/eng/isp/oas/tabrates/tab1-27.shtml

[andrewf]

Ah, ok then. All we need to do then is roll OAS into CPP/GIS with an appropriate change in premiums.

I think there is a loophole, too, where you earn a lot of your income is just a few years. Imagine a hockey player that pulls in $2 million per year for three years and is injured and can no longer play, but has enough money to live off just until 65. Their CPP contributions and benefits will be quite low, despite their high total wage income and they'd be eligible for GIS. To be fair, they would have paid a substantial amount of personal income taxes, so perhaps this is acceptable.

[MoneyGal]

Duh! CC is right (as is AndrewF) and I am wrong. I momentarily (over several moments) thought the GIS clawback was 100% when it is 50%.

I stand (actually, lie on the couch - I am at home from work sick) corrected.

[CanadianCapitalist]

I suppose it would be interesting to see what the proposed plans for the CPP will look like. I personally think the proposal is not likely to fly. If BC and Alberta are set on introducing a supplementary pension plan on their own, they are not likely to sign on to any CPP changes.

[MoneyGal]

You are making an assumption that for the exact same job duties, the private sector total package is the same or better than that in public sector.
In some professions that assumption may be true and in others, not.


I appreciate the discussion, too.

I wasn't trying to make this assumption. My argument was totally micro, not macro. Let's say you are (pick a profession) ...an accountant. You could get a job at (let's say) the Treasury Board. Or, you could work in private practice, even open your own firm. Let's say the PS job offers $62,000 + pension benefits - while the private sector job offers $54K as a starting salary, but no pension benefits - and no ceiling on the amount of growth over time.

I was attempting to argue that *whether or not* private sector and public sector jobs pay the same SALARIES for the same or similar positions, any rational individual will take total compensation into account when choosing among positions or paths.

If you choose (let's say) the private path, and your total compensation averages out at $70,000 per year - but the public sector job has an effective total compensation average annual benefit of $90,000 per year - why would you expect to be in the same financial position at retirement as someone who earned, on average, $20,000 more per year than you?