12:00 am
February 28, 2011
Well before the protests in Madison, Wisconsin, touched sympathetic nerves around the country, the disparity between public and private sector employee compensation drew controversy. A headline in Sunday’s Seattle Times asks, “Have Washington state workers given their fair share?” It’s both unanswerable and, in many respects, off point. Compensation for services provided is not the same thing as donating to the local charity.
It’s a market determination. A better question is this: Is the compensation provided enough to attract and retain good employees? You can find the answer by looking at turnover rates. Also, for state government, it makes sense to see what the private sector pays for equivalent services. The Times story, by Andrew Garber, points out one of the difficulties.
A Seattle Times analysis last year found that state workers don’t uniformly get better pay than workers in the private sector. Overall, lower-wage state workers tended to earn more than their nonstate counterparts, while higher-paid professionals made more in the nonstate sector.
But research indicates state workers have enjoyed better job security than workers in the private sector during the recession. At least so far. Studies also indicate public employees have better health-care benefits and are more likely to be enrolled in employer-sponsored retirement plans than private-sector workers.
In one of our Thrive Washington reports, we looked at the issue:
An acknowledged weakness in the wage comparison, as the Times noted, is that it did not include health care plans and pensions, which represent about 30 percent of total state employee compensation. The defined benefit pension plans provided to many state workers and the relatively low employee-paid share of health insurance coverage are better than the private and public sector norm.
Nationally, experts struggle with compensation comparisons. In the Washington Post, Jennifer Rubin looks at a pair of studies presenting contradictory findings. Here’s her conclusion and a link to the study she finds compelling.
In sum, intentionally or not, some very questionable analysis has consistently understated the privileged position of public employee unions and the extent to which taxpayers are on the hook. The actual figures are stunning: “Rauh and Novy-Marx estimate that each household already owes an average of $14,165 to current and former municipal public employees in the 50 cities and counties they studied, only including the unfunded portion of benefits that have already been promised based on work performed.
Here’s another article looking at federal compensation.
Also, the New York Times recently reported on pay and benefits. I can’t argue with the headline: In Battle Over State Payrolls, Data Show a Mixed Picture. The Times also reports various economists’ views on the contradictory findings cited in the Rubin piece.
Finally, for one of the best scholarly and accessible analyses of the collective bargaining flap don’t miss today’s Wall Street Journal commentary by Harvard economist Robert Barro.
Although circumstances vary considerable among the 50 states, the issue that has been joined in Madison will roil public opinion for some time. It’s as much economic as political. We’ll try to keep you posted on the best data as we find it.
Categories: Budget , Categories , Current Affairs.