State and Local Pay vs. Private Pay
Do state and local workers get paid more or less than their private sector counterparts?
That old question has taken on renewed life with the budget and labor disputes raging in Wisconsin and other states. Unfortunately, it’s not an easy question to answer.
As Ford Fessenden notes in a nice set of graphics at the New York Times, one reason is that observers disagree on what “paid” and “counterpart” mean.
If you simply compare average pay and benefits, for example, state and local workers come out well ahead:
But the two workforces differ. State and local workers are more educated, on average, than private ones. About 50% of state and local workers have a college degree, for example, while only 29% of private workers do. Controlling for that reduces the compensation differential.
But then you need to consider other factors as well, such as the generally longer hours and lower job security in the private sector.
Fessenden doesn’t reach a firm conclusion. Some data suggest that public employees are indeed paid more. But some narrower (and therefore more precise or less representative) comparisons show parity (hospital workers) or higher private pay (higher education).
Well worth flipping through the charts if you are interested in this issue.
Benefits of a College Education…
From pop culture that lead us to believe that college is toga parties, all night drinking games, drama guild, love triangles and illegal between teachers and students. The college experience is different for everyone who makes it uniquely yours. Howeve…
There are a lot of differences in such categories,Local Pay vs. Private Pay, it is usually matter in the field of the work or the position, i have been both private and government fields, but it also depends on the standing of the country. It is much discouraging in government even in private when you stand in a low rank, benefits is not that reliable, but many people gamble just to have some benefits even it is not enough.
Defined Benefit Pension Plans are one of the worst inventions of the 20th Century, and deserve the death that they have experienced in the private sector and the death that they hopefully will experience in the public sector.
These Plans are characterized by great risk and uncertainty. Uncertainty abounds with the amount of money that must be placed in the Funds, and risk abounds around the rate of return needed and expected by the Funds. As a result, these Plans are open ended, unknown committments, and ultimately create the type of problems we are now experiencing.
The Plans are also prone to “gaming”. Employees, particularly those subject to overtime can artificially inflate later year earnings, and earn a huge pension (see New York state i.e.). Politicians can used unrealistic discount rates to artificially lower Fund contributions. Employees, some of whom retire at 55 can be on the Pension Dole for longer than they have worked.
The Plans are failing on their own merit. They do not need some bogus manufactured “conspiracy” by the “Finance Sector” to hasten their doom, they will do it all on their own, as well they should.
Part of the problem is that the cost of pensions has been and continues to be grossly underestimated. High rates of return on pension assets are assumed, minimizing the purported need for current payments by the government. Taxpayers remain obligated to come up with the shortfall many years later after the rate of return is found to be much lower than the fantasy assumption. None of this deferred shortfall is counted in any comparison, but it’s nevertheless real.
This is a valid and extremely important point. The statistics with respect to pension and other benefits costs in the private and public sectors are only as good as the accounting. The obscure Government Accounting Standards Board sets the rules for most state public sector employee benefits. As regards accounting for these benefits, the GASB has been heavily lobbied by public sector employee unions. This has resulted in much more unrealistic accounting assumptions with respect to rate of return on investment (the largest source of pension funding) than applies to comparable GAAP rules for private sector pensions (7.5 to 8 percent returns versus 6 percent). Until we insist that the same accounting standards be used for public sector benefits as for private sector benefits, the public will continue to suffer from a gross misrepresentation of the cost of public sector employees.
http://calpensions.com/2010/10/05/pension-rules-shakeup-will-gasb-do-it-again/
The reason for the desire to full funding pension is a cheat by the finance sector, which seeks the end of all defined benefit plans, which gather few commissions, and their replacement by defined contribution plans, which generate commissions by the boat load.
It is time to call foul.
Until you have controlled for variables that affect compensation a graph like the one in this Post is pretty useless. Here is some info from the rest of the set that may be more meaningful.
1. 66% to 73% of state and local jobs are white collar compared to 54% in the private sector.
2. About 50% of state and local jobs are filled with individuals with a college degree compared to about 30% in the private sector.
Gee, I wonder if that explains anything?
Comparing hospital workers, about the best comparison there is since the work is comparable, the requirements comparable and the facilities comparable between private and public sectors, shows the compensation is and has been equal.
Anecdotal graphs like the one shown are highly misleading, but as people have pointed out, it is impossible to get individuals to accept the truth when their livlihood, political philosophy and self delusion requires that they treat the truth as false.
Most analysis of state/local pay versus private pay compares the input side; education, experience, job description, hours worked, etc.
An output measure must also be included to reach a valid conclusion about comparative pay.
If the output per government worker does not equal the output per private worker in the same job, then pay must be adjusted accordingly for the difference in productivity and efficiency. Pay comparisons and number of employees per job function on a project basis would be a way to compare government pay versus private sector based on comparable output. For example, does it take the same number of government and private engineers to complete a similar project in the same time?
The closest I have seen to a productivity based measure of pay is a comparison of private vs public school teachers based on teachers’ education level and number of years of experience. For both public and private, the period is an academic school year and the output is a full day of classroom teaching for the academic year.
Mark Perry, using the comparative teacher salary data from the US Dept of Education National Center for Education Statistics, found premiums of 31 to 100 percent based on comparisons of public and private teacher pay by teacher’s education level and number of years experience. Even this understates the government premium, since it does not include the better leave, vacation and sick day policies of public workers or their better pension and health benefits. Mark Perry’s comparison is available at
http://mjperry.blogspot.com/2011/03/public-sector-premium-for-school.html .
Actually, longer hours depends on occupation. Elected officials and their staffs work long hours. Fire and police work double or long shifts quite frequently. Teachers clock 6 hour days, but grade homework in their off time.
In the federal sector, the 8 hour day is still dominant for workers and contractors. In the non-profit sector in DC however, the rule is mostly a 7 hour day.
In other words, its complicated.
The issue with education is as much about how public schools face over control from the top, from school boards who mandate zero tolerance for Asprin but who still cannot enforce discipline at the hands of violent or unruly students. The solution is empowered principals, possibly single school boards (aka, charter schools) with little in the way of central offices and collective bargaining at the school rather than the system or state levels.
I was once told that there were three good reasons to be a teacher: June, July and August. I think that advice remains relevant today. Public (and private) sector teachers might well clock as many hours as typical full-time private sector employees in other professions, but only when school is in session. When one factors in the lengthy summer and other holidays, the annual number of hours worked is probably much lower. Those holidays are a major factor many are attracted to the profession and one should expect somewhat lower annual compensation as a result.
This is an artifact from when both teachers and students were farmers and teachers were later housewives or young women who could live at home during the summer.
The facts on the ground have changed a bit.
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