Wednesday, July 8, 2015

Is public sector employment too lucrative? Not lucrative enough?

There's a conversation gaining steam in this country about the compensation of public employees. The cover story in the new issue of the libertarian magazine Reason (subscription only) is called "Class War: How public servants became our masters," and it makes the following points: That the average federal worker made a substantially higher salary in 2005 compared with the average private sector worker; that the federal government frequently pays higher salaries than the private sector for comparable work; and that, as we've heard plenty of times before, many of these employees have been promised generous pensions that dwarf what most of their private sector peers will receive (and will be huge burdens for the governments that promised them). The takeaway is that the public sector is out of touch with economic reality.

Is public sector employment too lucrative? Not lucrative enough?

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There's a conversation gaining steam in this country about the compensation of public employees. The cover story in the new issue of the libertarian magazine Reason (subscription only) is called "Class War: How public servants became our masters," and it makes the following points: That the average federal worker made a substantially higher salary in 2005 compared with the average private sector worker; that the federal government frequently pays higher salaries than the private sector for comparable work; and that, as we've heard plenty of times before, many of these employees have been promised generous pensions that dwarf what most of their private sector peers will receive (and will be huge burdens for the governments that promised them). The takeaway is that the public sector is out of touch with economic reality.

Of course, there are politics involved here, so there's another way to look at the situation. In response to comments made by Mitt Romney in December arguing that public sector employees make disproportionately high salaries, the progressive think tank ThinkProgress produced a post observing that, though the average public sector worker made $71,206 in 2008, compared with $40,331 for private sector workers, those numbers are really apples and oranges. Public sector workers, the think tank points out, tend to have higher levels of education than private sector workers. What's more, there are very few public sector jobs that pay below $25,000; really low-wage private sector jobs are skewing the averages, and the equivalent of those jobs may not exist in the public sector.

As for comparable work, ThinkProgress cites work by Harvard economist George Borjas indicating that at the high end of the pay spectrum, public sector workers make less than their private sector counterparts. This doesn't contradict Reason's observation that, more often, the public sector pays better for comparable work, though Borjas contends that this makes it difficult for the government to recruit and retain high-skill workers.

The post doesn't address pensions. Certainly there are people who believe public pensions are deserved, though it would be hard to argue that a) they will be easy to afford, or b) there isn't a problem with a system in which public officials promise money for many years down the road, long after they've left their jobs.

What do you think of compensation for public employees?
Their pay is generally appropriate
They are overpaid
They are underpaid

In any event, we'd be curious to hear about your experience with this dynamic: Have you worked in both the public and private sectors, or do you have friends or family who work in a different sector than you? And how do the two compare?

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Every year, city government spends slightly more than $4 billion. Where does all that money come from? More importantly, where does it go? Are we getting the most bang for our tax buck? “It's Our Money” is a joint project between Philadelphia Daily News and WHYY, funded by the William Penn Foundation, designed to answer these questions.

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