Rudy Fichtenbaum: STRS's version of "The Real Story" is a complete distortion of the reality faced by most retirees

From Rudy Fichtenbaum

April 27, 2023  

The Real Story

STRS Staff have put out their 3rd "Real Story" during the election campaign. I wonder why! But what they are calling the "Real Story" is a complete distortion of the reality faced by the majority of retirees.

The real story is that when you talk about income you should use the median not averages. It is a well known fact, taught to every student in principles of economics, that the income distribution and the distribution of wealth are skewed to the right. This means the majority of people are piled up toward the low end of the distribution. This is why government statistics on income and wealth always use medians as the best measure of central tendency. In statistics there are three measures of central tendency, the mean (average), median and mode. In a normal distribution (a bell shaped curve) they all coincide so using the mean is fine.

But income is not normally distributed. In a distribution that is skewed right, the median is in between the mode and the mean which is why it is used as a measure of central tendency when discussing income or wealth. But I guess the Department of Propaganda must think teachers are too stupid to know that the mean presents a distorted view of what most retirees receive.

My father always used to tell me if our neighbor has $2 million and we have nothing, on average we are both millionaires!

Moreover, the bigger question is what will most retirees do after 20 years of retirement without a COLA? With just 2.5% inflation after 20 years, the real value of their pensions will decline by 39%.

In addition, the numbers in the "Real Story" are just for people with at least 34 years. But many of our retirees, especially women who might have taken time off after having children, or worked in more than one state, do not have 34 years. The Department of Propaganda, probably because it is headed by men, didn't consider the median income for all retirees, because it would have run counter to the narrative they were trying to promote.

If you want to know why people don’t trust the numbers put out by STRS, the latest "Real Truth" helps to explain this sad state of affairs.

Dr. Rudy Fichtenbaum is Professor Emeritus of Economics at Wright State University. He is also an elected member of the STRS Board since 2021.