Retired employees of the city of Boston have been relatively lucky in the recent downturn, receiving 3 percent cost-of-living increases on the first $12,000 of their pensions even in years when Social Security benefits — the prime source of income for many private retirees — have been flat. Now, however, some political leaders want to bump up the cost-of-living raise for retired city workers even further. Mayor Menino wants to raise the annual increase from $360 to $390, while City Council President Steve Murphy is pushing a much larger $90 hike. In better economic times, giving an extra boost to city retirees would be honorable; this year, however, it’s too much of a stretch.
The traditional justification for such hikes is that city pensions must serve as the equivalent of both the Social Security and employer-funded pensions that private-sector workers receive. But defined-benefit pensions are increasingly rare in the private economy; only about 20 percent of private-sector workers in New England have them. Instead, most private workers have to fund their own retirements through 401(k) plans, often with only modest contributions from employers. Meanwhile, the average annual Social Security benefit is $14,760.