The Truth About Public Employee Compensation Revisited

Yesterday, the Economic Policy Institute, who is supported by labor unions, released a new study designed to show how Minnesota’s public employees are underpaid in comparison to the private sector:

To assess whether Minnesota public employees are overpaid, we need to ask two simple and related questions: compared with whom and by what criteria?

When determining the groups to be compared, the standard of comparison for public employees is usually private sector workers with similar levels of education, experience, and hours of work. While we ideally would compare public sector workers with private sector workers performing similar work, it is not possible to find private sector matches for the entire spectrum of public employees. Too many critical occupations in the public sector—for example, police, fire, and corrections—lack private sector analogues. Even public and private teaching differs significantly. Public schools accept all students, while private schools are sometimes highly selective and may exclude or remove poor performing, special needs, or disruptive students.

Consequently, comparing workers of similar “human capital” (fundamental personal characteristics and labor market skills) is considered the best approach. Analyses based on comparisons of personal characteristics and labor market skills capture what comparable work studies have shown to be the most important and salient attributes affecting compensation.

This has actually become a very popular comparison for the union supporters because it have the effect of making civic workers look like the victims. However, this is just another attempt to compare apples to oranges, as Daniel DiSalvo points out in The Trouble with Public Sector Unions:

Most economists agree that public-sector unions’ political power leads to more government spending. And recently, Chris Edwards of the Cato Institute documented how government unionism has abetted growth in public-sector compensation. Generally speaking, the public sector pays more than the private sector for jobs at the low end of the labor market, while the private sector pays more for jobs at the high end. For janitors and secretaries, for instance, the public sector offers an appreciably better deal than the private economy: According to the Bureau of Labor Statistics, the average annual salary for the roughly 330,000 office clerks who work in government was almost $27,000 in 2005, while the 2.7 million in the private sector received an average pay of just under $23,000. Nationwide, among the 108,000 janitors who work in government, the average salary was $23,700; the average salary of the 2 million janitors working in the private sector, meanwhile, was $19,800.

For workers with advanced degrees, however, the public-sector pay scale is likely to be slightly below the private-sector benchmark. Private-sector economists, for instance, earn an average of $99,000 a year, compared to the $69,000 earned by their government colleagues. And accountants in the corporate world earn average annual salaries of $52,000, compared to $48,000 for their public-sector counterparts.

It makes sense that a young attorney in a private firm would make more money than a peer working at the district attorney’s office as a public defender. What doesn’t make sense is why it costs $4000 more to clean a public toilet.

But what of the public employees we can’t compare to a private counterpart? Mr. DiSalvo discusses that too:

Not as easily captured is the comparable worth of those government workers who lack counterparts in the private sector, such as policemen, firefighters, and corrections officers. But that very monopoly status has given the union representatives of these workers enormous leverage, which they have converted into major gains. For example, in New York state, county police officers were paid an average salary of $121,000 a year in 2006. In that same year, according to the Boston Globe, 225 of the 2,338 Massachusetts State Police officers made more than the $140,535 annual salary earned by the state’s governor. Four state troopers received more than $200,000, and 123 others were paid more than $150,000. While people whose jobs entail greater risk of life and limb certainly deserve higher pay, union power has clearly added a substantial premium.

I’d read the remainder of the Economic Policy Institute’s study, but I find their methodology flawed from the beginning, as well as tainted by their vested interest, so I fail to see the point. The issue, in case the Economic Policy Institute is interested, isn’t the compensation we give to our public employees, the issue is the unions’ ability (along with government) to promote inefficiency and waste that place our public employees in the position to look like the bad guys. Perhaps if unions and government allowed our public employees the opportunity to give their best to the citizens, they would do so, and happily.

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