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.

4 thoughts on “State and Local Pay vs. Private Pay”

  1. As one who has worked in both private industry and the government, I would say that it is difficult to reduce this question to dollars. It isn’t just how many dollars you receive in salary and benefits, it is the overall utility (for you) of all of the aspects of a job. Working for the government provides stability and predictable holidays, but one has to contend with the bureaucracy and there is often much less upside potential, which reduces the benefit of a career solely in government.

    The real way of answering whether public employees are paid appropriately isn’t to play around with accounting numbers. It is to study how many people of similar quality (but differing utility weightings) apply for similar positions in government and the private sector.

    On a side note, it’s interesting to me that the curves for public and private pay appeared to have diverged from each other, primarily in one big jump in around 1985… I wonder what happened to drive that big change. It might be mix of jobs based, but it may also help answer this question by being an increase (relative to a fair wage) or an increase (driven by need to fill positions).

  2. I can’t give definite numbers for anyone else, but I doubled my salary the year I moved from a state job to a nearly identical job for a grocer.

  3. I think there is a simple way to address this.

    Why should I want to work until I’m 66 (my full soc. sec. retirement age) to retire on my 401k, Roth IRA, rollover IRAs, and Social Security so that (many) public employees can retire in their 50’s on their public pensions plus taxpayer-funded retiree health benefits in many cases?

    If you do not think this is true, look around. Rules of 85 or 90 give many public employees that benefit.

    It’s that simple to me.

  4. Interesting numbers and discussion. Here are some more points.

    The higher level of education in government may reflect educated people taking government jobs that do not require a lot of education. If you over pay for a position you will naturally attract more highly qualified people to fill that position. This does not mean you were not paying too much.

    The government clearly pays its big time managers less than business, but tends to pay the people at the bottom a lot more. Over all figures do not reveal this point. The truth is buried in the mean average, unless this was done with median figures.

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