The Great Recession and its aftermath have left the entire country scrambling to maintain a standard of living that just may have gone with the wind. The unemployment rate won’t budge, wages are stagnant, and local and state governments have been forced to balance their budgets by slashing services to previously unthinkable levels.
Amidst such economic uncertainty, it’s not a surprise, perhaps, that scapegoats large and small would emerge. In California, which is in dire financial straits, this campaign season has included a lot of finger-pointing at public employees, who are subject to the perception, rightly or wrongly, that they have been immune to the reduced economic circumstances of their private sector counterparts. In the gubernatorial race, Meg Whitman has tried to use the support of public sector unions against Jerry Brown; in San Francisco, the most highly contentious measure up for voter consideration is Proposition B, which would require city employees to contribute more of their health and pension costs.
Now, wading into the roiling waters of this debate comes a new report by economists at UC Berkeley and Rutgers, which finds that California public workers actually earn about the same in salary and benefits as private employees, despite having a higher level of education.
From the introduction of “The Truth about Public Employees in California: They are Neither Overpaid nor Overcompensated,” by Sylvia A. Allegretto and Jeffrey Keefe.
Recently, there has been a great deal of debate and consternation over the compensation of public-sector employees across the U.S. It has been asserted that state and local government employees are overpaid compared to workers in the private sector. In California government workers have been vilified as scandals and anecdotes pass as confirming evidence of exorbitant pay. This research is especially important given the outrage over the pay of municipal officials in Bell, California. The outrage over what happened in Bell is reasonable and just. Many of the players immediately resigned and on September 21, 2010 eight city officials were arrested…
While anecdotes that stem from public-sector corruption capture much attention, it is a data-driven analysis of public-sector pay and compensation that is needed to answer the question: How do the pay and benefits of public sector workers compare to those in the private sector? This is a legitimate question that should not be answered anecdotally. The research in this paper investigates empirically whether California public employees are overpaid at the expense of California taxpayers. The results from this analysis indicate that California public employees, both state and local, are not overpaid. The wages received by California public employees are about 7% lower, on average, than wages received by comparable private sector workers; however, public employees do receive more generous benefits.
An apples-to-apples comparison, or one that controls for education, experience, and other factors that may influence pay, reveals no significant difference in the level of employee compensation costs on an annual or per hour basis between private and public sector workers.
Nonetheless, there are substantially different approaches to staffing and compensation between the private and public sector. Specifically, there are important workforce differences between the two sectors in terms of educational attainment. On average, California’s public sector workers are more highly educated.
Of full-time workers, 55% hold a four-year college degree in the public sector compared to 35% in the private sector…
Public employers contribute on average 35.7% of employee compensation expenses to benefits, whereas private employers devote 30% of compensation to benefits. Public employers provide better health insurance and pension benefits. Public employers contribute 11.8% to insurance, mainly health insurance, compared to a 7.7% contribution by private employers. Retirement benefits also account for a substantially greater share of public employee compensation, 8.2% compared to 3.6% in the private sector. Most public employees also continue to participate in defined benefit plans managed by the state, while most private sector employers have switched to defined contribution plans, particularly 401(k) plans. On the other hand, public employees receive considerably less supplemental pay and vacation time, and public employers contribute significantly less to legally-mandated benefits.
You can read the full report here.
For a look at San Francisco’s attempt at making public employees pay more for their benefits, take a gander at this post on Proposition B…