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Public employees don't make more than private employees

There seems to be a lot of jealousy toward public employees out there, most of it powered by an impression that public employees get more money for less work. But via Kevin Drum comes this table from the Economic Policy Institute, which suggests that this just isn't true:

blog_public_private_pay.jpg

The data (pdf) come from Rutgers's Jeffrey Keefe, and he also ran "a separate calculation that controls for full-time status, education level, years of experience, age, gender, race, employer organizational size, industry, and hours worked," which found that "public employees are compensated 2-7% less than equivalent private sector employees."

Which makes sense: You never hear public employees say that they went into government for the money. But to make the more counterintuitive point, this is a fairly counterproductive conversation. We want really good regulators watching Wall Street. We want talented people teaching our children. We want our trash picked up by workers who want to keep their job and we want the DMV staffed by individuals who aren't incompetent. That isn't to say we should pay every public worker millions and millions of dollars, but very few go into government work because they're of a charitable bent. It's a job, like any other, and it attracts talent only by paying it well.

By Ezra Klein  |  September 16, 2010; 11:04 AM ET
 
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Comments

Does this chart factor in the value of defined benefit pensions as part of the total compensation?

Posted by: jnc4p | September 16, 2010 11:09 AM | Report abuse

These are averages, right? So aren't the fairly small number of private sector workers making anywhere from 300 grand to many millions of dollars a year, something basically impossible for most government workers, skewing things? Public pay taps out at a way lower amount than private pay, but most workers in either sector are never going past somewhere around 150 grand a year. So the real argument is about the general middle and lower classes, not the rare millionaire. And that's what people mean when they say, "I'm doing X for the money." They mean be a banker, or a lawyer, or a doctor, and statistically there aren't that many of those, but there are enough to drag private pay averages higher.

Also, are benefits included in these calculations? That would seem pretty important.

Posted by: jt636 | September 16, 2010 11:13 AM | Report abuse

"Does this chart factor in the value of defined benefit pensions as part of the total compensation?"

Pensions are probably the largest chunk of it, but the value of the entire benefit package should be considered as well. Very few private sector jobs include the types of benefits that public-sector workers enjoy. Take a look at the share of health insurance paid by workers for example.

Posted by: AuthorEditor | September 16, 2010 11:14 AM | Report abuse

Clicking through to the study I see that benefits are included in the calculations, but it is unclear to me if these are "averages", which would seem to be swayed by the huge compensation some get in the private sector. Also, I think this varies a lot state to state. For example, superintendents of school districts here in NY often earn in the $150-$175,000 range, and this can be in towns and counties where the average salary is about 1/5 that amount.

Posted by: AuthorEditor | September 16, 2010 11:26 AM | Report abuse

Beginning teachers should be paid a lot, lot more. It would both entice talented people into teaching and keep those teachers who have wanted to be teachers their whole lives but who become discouraged by the schooling environment.

There is so much attrition in the first 5 years and many of those are talented, inventive teachers who start their profession wanting to use some of the progressive teaching and learning methods they learned in college, but then they are slammed by an archaic system where the norm is to copy hundreds of dittos of worksheets with meaningless fill in the blank, out of context vocabulary words that will be on their standardized tests.

Posted by: ania8 | September 16, 2010 11:35 AM | Report abuse

Umm, hey Ez. Does this factor in huge retirement pensions and being able to retire after ~20 years? Well? Do you know anything other than how to bloviate?

Posted by: illogicbuster | September 16, 2010 11:41 AM | Report abuse

Ezra,

I think you should make it clear that this only uses data from state and local gov't employees. Federal employees like DOJ lawyers, NASA scientists, custom agents, Senators, etc. are not included. I don't know how that'd change the results, but its possible that it would.

Also, I think quantile analysis would be interesting. The most interesting differences might be in the distribution, not the mean.

Posted by: Nylund154 | September 16, 2010 11:43 AM | Report abuse

Great analysis. This is for state/local-level employees only. Here we are in DC and we're looking at an analysis of individual state or local city/town employees. States do have to balance their budgets, even though pensions are not being fully funded in some cases.

Including federal employees would blow up this analysis and turn it the other way. Everyone knows this.

Posted by: misterdrew | September 16, 2010 11:45 AM | Report abuse

Sorry, son, but what's with all this "we" crap? I didn't ask for more Wall St., regulators, I didn't ask for a DMV, and I certainly didn't ask to shell out a crapload of money to pay them.

People aren't pissed because public workers earn more than they do. They're pissed because they have to shell out for the privilege of getting screwed by their government. The shortstack at the SSA is not a star teacher, and the morons at the IRS (thank you, Joe Stack) are not cops or firemen. And the soul patch sissies who run around the White House getting paid six figures to kiss the President's ass aren't soldiers.

If this is an alien experience for you, consider a career that doesn't involve being yet another unproductive, DC leech.

Posted by: pcannady | September 16, 2010 11:48 AM | Report abuse

There seems to be a lot of envy directed at defined pension packages of public workers, but it should be noted the public employees are shut out of Social Security, the defined pension that nearly every other American is signed on for. For the public sector, it's our pension and...zip else.

Posted by: ciocia1 | September 16, 2010 11:50 AM | Report abuse

Nylund,

my understanding is that including federal employees would raise the number although interested in how much. Also if you factor in all the "costs" of an employee (ie benefits and pensions) as others mention the cost of government employees is much greater than private. Also government employees don't have CEO's that skew the numbers. If you take them out again it doesn't favor Ezra or the "liberal leaning" EPI's numbers. But then again when you want to skew the numbers I guess that's what you do.

So in other words I take this for what it is. A poor attempt at propoganda.

Posted by: visionbrkr | September 16, 2010 11:50 AM | Report abuse

ciocia1,


I've been in the private sector for almost 20 years now. I'm almost 40. I'm sure (God willing) I'll work until I'm at least 65 in the private sector. I'll NEVER get out of SS what you get from your pension I'd expect.

I'll gladly trade you this minute whatever pittence I'll get from SS (assuming its still solvent then) for your pension.

Posted by: visionbrkr | September 16, 2010 11:59 AM | Report abuse

visionbrkr:

Yours is the standard line from Social Security's future recipients, but the truth is, Social Security is politically untouchable, unlike public pensions which have eroded in my state for the past several years. You will live long, and get your money back. Which, as a conservative, you will find unbearable :D.

Posted by: ciocia1 | September 16, 2010 12:04 PM | Report abuse

ciocia1,

I also suspect that since you don't take out of SS you also don't put into it. I'm guessing you left that part out though. Do you put into your pension??? I know I put into my 401k. Do you pay for your benefits (healthcare, disabilty etc?) I do. I also fund my HSA.

Also I haven't gotten a raise in 4 years. Have you?

Posted by: visionbrkr | September 16, 2010 12:07 PM | Report abuse

visionbrkr:
Glad you asked. I do kick in for my pension, and in fact, my pay has been frozen, and my pay-in to the pension got bigger as a cost-cutting measure, while the bennies got cut back, and since my department got cut in half, we are doing more work with less folks. Where DO you get your info about the public employee's palmy life?

Posted by: ciocia1 | September 16, 2010 12:10 PM | Report abuse

"There seems to be a lot of envy directed at defined pension packages of public workers, but it should be noted the public employees are shut out of Social Security, the defined pension that nearly every other American is signed on for. For the public sector, it's our pension and...zip else."

Defined pension is a far superior financial option than social security.

Teachers pay 5.5% of income into their pensions here in NJ, compared to 12.4%.

Teachers get back $46k with 25 years of service, on average, and you can take it at 55. Maximum annual SS benefit right now is about $28k and you get that at age 62.

Posted by: krazen1211 | September 16, 2010 12:11 PM | Report abuse

@AuthorEditor: "For example, superintendents of school districts here in NY often earn in the $150-$175,000 range

In our big school districts in Tennessee, that's what our principals get paid. Superintendents make on average, between $175k and $300k.

I don't think an apples to apples comparison, if it comes up with typical government workers getting paid less than typical private sector employees, or there is data in there that, rightly considered, skews the numbers. For the great majority, moving from a private sector job to a government job is a step up, whatever your position (I should know!).

Which doesn't even begin to include the value of seniority, tenure, general job security, etc. Unless you are going to be a fat cat CEO--and you know it--or some brilliant Wall Street trader, government jobs are extremely attractive compared to private sector jobs.

Only place I've ever worked where I've gotten a raise during a recession. ;)

Posted by: Kevin_Willis | September 16, 2010 12:13 PM | Report abuse

A second piece of information.

New Jersey hired ~11000 state and local workers in the 1990s. We hired ~70000 of them in the 2000s.

Classroom sizes keep shrinking for no reason. Some predict doom and gloom if we were to let go of ~10% of our teaching force (as we are starting to do now), but that would merely be returning us to where we were during the Clinton administration.

Posted by: krazen1211 | September 16, 2010 12:14 PM | Report abuse

Unless the chart includes pension and health benefit packages, it is completely worthless.
This disingenuous trick is pulled every time an uproar is made over public employee salaries. A left wing policy group comes out with a chart that completely neglects to mention the outrageous defined-benefit pensions or the health care packages received by public sector employees.

Posted by: Bob65 | September 16, 2010 12:16 PM | Report abuse

ciocia1,

so you mention you pay in but you don't say how much. You also don't mention that your orignal premise that you don't get SS did not include the fact that you don't put into SS. When you can retire? 55. 60?I can retire when I've got enough in my 401k to support myself for the rest of my life. I'm thinking I'm lucky if I can retire when I'm 65. If not I'll be the one serving your grand kids the happy meals. Do me a favor and ask them to be nice to me, OK?


And doing more work with less folks has been the status quo for YEARS in private industry. Welcome to the party!

Posted by: visionbrkr | September 16, 2010 12:17 PM | Report abuse

@visionbrkr: "Also I haven't gotten a raise in 4 years. Have you?"

Heh. In a stepped system, you're pay goes up every year for a certain period of time (in my case, 8 years). Then we usually get 1% or 2% raises at the end of the budget year, as it gets built in as part of the budget.

We're not federal (county government), so no pension, and same SS as everybody else. However, we do have a retirement plan that we put into, and if I can manage to keep working here until I'm 71 (now, there's a challenge!), that + social security will allow me to retire without having to worry too much about how to pay the electric bill. Medical coverage is much better than for any of the companies I worked for, but I always worked for small companies, so imagine we get a much better group rate just due to our size.

That having been said, best job I have ever had. Not only is the compensation very respectable, it's great to be in public service. I personally find it a lot more rewarding and interesting than selling medical supplies or designing food packages or marketing overstock CDs and DVDs (all other things I've done).

Posted by: Kevin_Willis | September 16, 2010 12:21 PM | Report abuse

At least with the people I'm surrounded by (people with Ph.D.'s, JD's, etc.) its a well-known fact that the government gives you a MUCH smaller paycheck, but you get shorter hours, more job security, and better benefits. (one friend has gotten offers that pay 2 to 3 times his gov't wage, but his gov't job allows him to leave at 5pm and pursue the other interests in his life), so to him, its not worth it. Plenty of others opt for the bigger paycheck of the private sector. In my line of work, gov't work is seen as a "back up plan," and not something people strive for.

I note that my personal experience only pertains to those with advanced degrees.

One can go here:

http://jobsearch.usajobs.gov

and look up jobs similar to your own and see what the going rate is. Heck, you may even find a better job!

Posted by: Nylund154 | September 16, 2010 12:22 PM | Report abuse

@visionbrkr: "I'm thinking I'm lucky if I can retire when I'm 65."

Heh. If I can, I'm going to keep working here as long as I can. After fifteen (twenty?) years, I get like a month of paid vacation. :)

Plus, again, I like what I do.

Posted by: Kevin_Willis | September 16, 2010 12:24 PM | Report abuse

I do have defined work hours (no 80 hr weeks), but I work every other weekend, and a couple of nights a week. I can retire after 32 years, if my pension and savings are o.k. You can retire at 62 or 65 when you have enough with your savings and pension (aka social security). And yes, SS is a defined pension. They don't cut off a lump and let you float.

Posted by: ciocia1 | September 16, 2010 12:33 PM | Report abuse

An EPI study finds that state and local gov't employees are not overpaid and in fact are slightly underpaid.

This would have been worthy of a post if EPI had found the opposite. EPI is utterly predictable and therefore their "studies" are useless as a guide to policy.

Quiz. How would EPI "studies," complete with multivariate regressions, turn out w.r.t.:

1. The effect on unemployment of the minimum wage
2. The effect on the economy of additional stimulus spending
3. Whether CEOs are overpaid
4. Whether state and local employees are overpaid

I know, and you know, exactly what they would find.

Posted by: ostap666 | September 16, 2010 12:35 PM | Report abuse

Nylund154:professionals get "shorter hours, more job security, and better benefits"
More to Nylind154'a point, does the study factor in differences in hours, risk of loss, real vacations? While the difference may not be so great at the lower levels, professionals such as attorneys in private practice often work in excess of 2000 billed hours/year (not just hours at the office), are responsible for generating business (which means that taking a vacation reduces income), have income directly tied to productivity, and have vacations and weekends interrupted by client concerns. This is not a gripe, but merely a confirmation of Nylund154's point that equal annual compensation does not mean the effort to obtain that equal compensation is the same, and without factoring in "quality of life" issues, the results are not truly reflective of the reality.

Posted by: jpfred | September 16, 2010 12:45 PM | Report abuse

Bravo! Ezra. I worked for the government a while ago.
One of the things we knew was that you would never get rich working for government. Nor did we make the same as they did in the private sector.
of course, that was before the great wealth trasfer to the upper 2 percent while the wages for average employees regressed and benefits went by the wayside.

Now our less then stellar salaries and the fact that we got health insurance benefits now a days would seem like public employees are making the big bucks.

If greed did not overtake the private sector, stalled or turned back salaries and ended most if not all benefits in the past decade, then there would not be the rampant jealousy towards public employees.

Posted by: vwcat | September 16, 2010 12:46 PM | Report abuse

@Kevin,

that's alright. With PPACA I'm sure soon I'll be on the government's dime.

A month of paid vacation? I won't know what to do with it. If I get 5 minutes away from my blackberry I start to get the shakes.

I also enjoy what I do and that's a major plus.

Posted by: visionbrkr | September 16, 2010 12:49 PM | Report abuse

"We want really good regulators watching Wall Street. We want talented people teaching our children. We want our trash picked up by workers who want to keep their job and we want the DMV staffed by individuals who aren't incompetent."

That is the whole point. The Republican party wants a non-functioning government. Republicans have found another meme with which to hamstring government. The Republican platform works like this:

#1 Make government ineffective by managing poorly.
#2 Blame government for being ineffective.
#3 ????
#4 Profit!

Posted by: zosima | September 16, 2010 12:50 PM | Report abuse

I will add the fact of pensions.
Most public employees do not have grand pensions.
their pensions are about average. Actually compared to those in the private sector, our pensions are a bit underwhelming.
My husband's private sector pension was much better then many of my friends who worked with me in the public sector.
the fact is that many have been misled and lied to (again and again) by the good folks at Fox news (comedy) channel.
And what they don't tell you is that along with benefits and salaries, people's pensions in the private sector have been shrinking as well.

Posted by: vwcat | September 16, 2010 12:54 PM | Report abuse

Well, Ezra posted a study finding that public sector jobs pay slightly less than private sector jobs. Maybe this study doesn't include all the data points it should. Maybe there are intangibles like job security that are hard to factor in. I don't know. What I do know is that I'm seeing a lot of responses that rely on anecdotal evidence or gut feeling guesses. When I see studies showing that public workers earn more than their average private sector counterparts I'll have to look at them closer. I'll also look for good arguments why we shouldn't want government jobs to pay slightly higher than their average private sector counterparts. We shouldn't want a scenario where government lawyers are overworked, underpaid, outgunned, and less talented than the private attorneys they're going up against. Attracting and keeping good employees to the government is important.

Posted by: MosBen | September 16, 2010 1:08 PM | Report abuse

@MosBen: "I'll also look for good arguments why we shouldn't want government jobs to pay slightly higher than their average private sector counterparts."

Oh, you definitely want your government employees to be well paid. Especially those that work in county government. It just makes sense. Especially database analysts. If that discussion ever comes up. :)

Posted by: Kevin_Willis | September 16, 2010 1:33 PM | Report abuse

"Most public employees do not have grand pensions.
their pensions are about average. Actually compared to those in the private sector, our pensions are a bit underwhelming."

Because pensions in the private sector are known for being both highly generous and widely offered? Give me a break. Your husband's pension is not representative.

Posted by: justin84 | September 16, 2010 2:12 PM | Report abuse

justin84:

Pensions in the private sector used to be pretty good until corporate management decided to use the pension funds like their own personal piggy banks, emptied it out and then blamed the unions and workers for it when the time came to start paying out benefits.

It's sadly happened in the public sector too. State gov't thinks it can make a few bucks playing pension funds on the stock market and when the market crashed, they had nothing to pay out. Totally the unions fault, of course, too.

Posted by: lol-lol | September 16, 2010 3:06 PM | Report abuse

At the federal level, when comparing similar job categories and education levels, salaries/bonuses are much smaller--especially at higher-income and education levels--but benefits are as good or better than private industry. There's plenty of BLS, BEA, and OPM data online to show this.

Benefits are harder to compare and quantify than salaries, which makes it difficult to compare overall total compensation and often leads to wildly different conclusions by people. The evidence that I've seen indicates that the federal government roughly matches the private sector in cash-value of total benefits (profit sharing, 401(k)s, paid days off, etc.); provides more job security but the difference is less than most realize, especially at higher income/education levels; provides more "spartan" physical working conditions, again especially at higher income and education levels; and--on average--requires fewer working hours per week.

BTW, MosBen offered a rarely-mentioned fact--you DO NOT want to underpay government employees, unless you want lower quality people and higher corruption. (It's not just county employees--we need good and honest city police and building code inspectors, DEA and Secret Service agents, IRS auditors, and many many others.) I think overall compensation should be, and currently is, roughly comparable to the private sector.

Posted by: pjro | September 16, 2010 3:09 PM | Report abuse

I'm sure they were nice lol-lol.

To me, the moral of the story is that the only person you can trust to adequately fund your retirement is the same person with the greatest interest in it being comfortable - you.

Everyone else looks at those dollars and sees alternative uses for them.

Posted by: justin84 | September 16, 2010 3:38 PM | Report abuse

I agree with others who have questioned whether this includes benefits and pensions.

Also isn't median income a more appropriate measure?....seems like in the private sector...those guys on wall st. might skew things a bit.

Posted by: Mazzi455 | September 16, 2010 4:03 PM | Report abuse

*Federal employees like DOJ lawyers, NASA scientists, custom agents, Senators, etc. are not included.*

that would almost definitely make public employees look even _less_ well paid. Heck, the DOJ lawyers I know GAVE UP high paying firm jobs for their more interesting DOJ jobs. NASA Scientists could make more money working for a defense contractor. Senators can always leave and become lobbyists.

*Everyone else looks at those dollars and sees alternative uses for them.*

Including your mutual fund manager who wants to bleed your retirement fund for the fees.

Posted by: constans | September 16, 2010 4:06 PM | Report abuse

"Including your mutual fund manager who wants to bleed your retirement fund for the fees."

Unfortunately no one wants to manage money for free. At the same time, there are mutual funds out there that charge quite reasonable fees if cost is a concern.

Posted by: justin84 | September 16, 2010 4:32 PM | Report abuse

"BTW, MosBen offered a rarely-mentioned fact--you DO NOT want to underpay government employees, unless you want lower quality people and higher corruption. (It's not just county employees--we need good and honest city police and building code inspectors, DEA and Secret Service agents, IRS auditors, and many many others.) I think overall compensation should be, and currently is, roughly comparable to the private sector."

In today's world we can underpay them. There's plenty of labor available.

Posted by: krazen1211 | September 16, 2010 5:33 PM | Report abuse

"very few go into government work because they're of a charitable bent"

I'm one of those very few lol. Well the truth is, if I couldn't at least support myself, I wouldn't do this work, that is true. But my expectations for my finances are pretty low: i can keep myself out of debt, have shelter, have clothes, food, and the occasional dinner out, and that's about it. I don't have a lot of discretionary funds, to do a lot of "fun stuff" on my salary but that's o.k. - I knew that coming into this career.

I came from a family that believed being of service was of immense value - I was taught public service was noble. I was also taught that If I actually wanted a good chance at making some real money (i.e. a chance to be rich or at least, upper-middle class) not to ever go into non-profit or government work. As an adult, those values stayed with me.

Ultimately, I do the work that I do because I need to do work that I believe in. It's really that simple,

Posted by: silentbeep | September 16, 2010 6:16 PM | Report abuse

Can I just add that an incompetent public sector plumber is A LOT MORE EXPENSIVE after you correct the screw ups than a competent public sector plumber??

Posted by: lroberts1 | September 16, 2010 6:35 PM | Report abuse

If this study doesn't take into account the fact that public employees get defined benefit pensions, while private employees get defined contribution pensions, then it is garbage.

If he did take this into account, he should clearly show the discount rates and inflation rates assumed in the valuation. I suspect he is undervaluing the defined benefit pension plan to get the answer he wants.

Posted by: sold2u | September 16, 2010 6:51 PM | Report abuse

Somewhere, a CEO is laughing because the lobsters in the pot (public and private) are pulling each other back into the pot, matching pension cut for pension cut and wage cut for wage cut, while the wealthy have their paid-for politicians fight to keep their taxes good and low. This is a continuation of the 30 GOP fight to demonize one group after another--the poor, the unionized, public employees, etc., and keep the heat off themselves. Way to go, USA!

Posted by: ciocia1 | September 16, 2010 9:27 PM | Report abuse

In the previous posting, I meant the 30 year fight.

Posted by: ciocia1 | September 16, 2010 9:29 PM | Report abuse

"BTW, MosBen offered a rarely-mentioned fact--you DO NOT want to underpay government employees, unless you want lower quality people and higher corruption. (It's not just county employees--we need good and honest city police and building code inspectors, DEA and Secret Service agents, IRS auditors, and many many others.) I think overall compensation should be, and currently is, roughly comparable to the private sector."

To add to Krazen's comment on this - by this theory, criminals aren't bad, just underpaid.

Posted by: justin84 | September 16, 2010 11:43 PM | Report abuse

Krazen:
Would you want to underpay people because you can? Way to miss the point. You would, in fact, have "somebody" to do it, but only the worst people. You will have the society we have now, where there are renumerative financial products (some of which are toxic to the economic well-being of the rest of society), and poor child care, poor teaching--and poor oversight of the financial sector and its financial products. In both the current scandal of toxic financial products and the Savings and Loans scandals of the 80s, much of the problem involved not being able to hire the best people in government to oversee and curb these excesses. How well has that worked out for us?

Posted by: ciocia1 | September 17, 2010 6:53 AM | Report abuse

Despite what some have said, the cited study does include benefits. Several news stories in the past year (USA Today, Zuckerman in US News, WSJ) have exploited the comparison of private and public sector AVERAGE salaries (without benefits). This comparison is ridiculous. Making a simple comparison of averages ignores the two factors most influencing compensation levels, education and experience. Government workers have significantly higher levels of education and between 3-5 years more experience according to various studies. Not only does the public sector have a higher percentage of college educated workers (approximately 50% versus 35%) but it also has a lower percentage with high school or less levels of education (20-25% versus 35-40% in the private sector. Somewhere as much as 40 million of the private sector's 104 million jobs are held by people who's low educational levels command the lowest wages in America. This disparity in education makes a raw comparison of averages between the two sectors meaningless. And yet many Republican officials around the country continue to exploit these meaningless statistics.

Posted by: philipmathews1 | September 19, 2010 3:32 PM | Report abuse

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