Are Public Employees Overpaid?

If you believe what you read on blogs or hear from certain politicians and pundits, a new kind of haves-vs.-have-nots class war is brewing across the land. Not between the rich and the poor, but between private and public sector workers, as related here.

Scandalous stories of public officials enjoying lavish or disproportionate pay and benefits at taxpayer expense, such as in Bell, Calif., and elsewhere , frequently make headlines and prompt calls for reductions in such compensation.

As with many other economic and taxation issues, the answer to the question posed in the title of this post usually depends on which side of the political spectrum you are on. Conservatives tend to answer “yes,” while liberals tend to answer “no” .

But which side is correct?

Before I delve into that question, I will first make some disclosures.  I am a full-time employee of the state of Illinois, making $35,000 per year. I do not belong to a union, and due to the nature of my job and agency, probably never will. I have only received one raise the entire time I have been so employed (nearly 4 years) due to a promotion to a slightly higher job level. I do not expect to receive any raises for the foreseeable future; in fact a pay cut is a distinct possibility. Prior to that I worked 20 years in private sector employment in the newspaper field. In some instances the pay and benefits were comparable to, and even better than, my current job. In other instances they were not as good.

Now to the question: are public employees overpaid? That depends on who you ask and how one defines “overpaid”. The average pay of state and federal employees in general is higher than that of private sector workers in general. When broken down by education, profession, etc. the picture is not as cut and dried. For lower-skilled jobs requiring only a high school or vocational education — e.g. custodians, receptionists, guards — the public sector pays better, whereas for professional jobs requiring a college degree or higher (attorneys, doctors, CPAs, etc.), the private sector pays more — often a lot more. These articles from Kiplinger and from Governing.com explain the differences in greater detail.

Two of the biggest reasons for these disparities are that 1) public employment tends to have a greater percentage of jobs requiring a college education or beyond and 2) public sector jobs are more likely to be unionized.

Public employee unions are a favorite bete noire of fiscal conservative politicians and candidates at the moment, and much of the public seems to agree with them. The fact that public employees continue in many (though not all) states and localities to enjoy benefits most private employees no longer have, such as regular salary increases, defined benefit pension plans, and caps on health insurance premiums and co-pays, arouses resentment among ordinary citizens who are forced to pay for such benefits via taxation.

Although many officeholders and candidates talk a good game when it comes to reining in public employee benefits, in practice the most frequent targets of budget cutting measures such as layoffs, furlough days and pay cuts, are lower or mid-level non-union employees. They often end up being punished for the sins (real or perceived) of their higher placed or unionized colleagues, simply because they are the easiest targets — not protected by either union contracts or political/personal connections.

The biggest problems on a state and local level are pension deficits — the growing gaps between the amount of money in public pension funds and the amount of benefits those funds are expected to pay in the future. According to this report by the Pew Center on the States, pension shortfalls are fiscal time bombs that threaten to devour entire state and city budgets if nothing is done to defuse them before it is too late.

How did the situation get that bad? In most cases it was due to a variety of factors — yes, generous union contracts played a part, but so did repeated failure on the part of lawmakers to invest properly in public pension funds, demographic changes (aging of the Baby Boomers, people living longer), and investments tanking due to the recession. No one factor can be singled out, and the entire blame for the pension crisis cannot be laid at the feet of one person or group of people. But regardless of who is or was to blame, the problem has to be dealt with, not swept under the rug.

Private sector employees are quick to point out that while they have to support public employee benefits with their taxes, public employees are not forced to do the same for private employees — they can choose whether or not to do business with a private company.

I agree, and this is in my opinion an argument that should be taken most seriously. For that reason, public employees are by necessity accountable to the public and will always be subject to various restrictions and considerations that do not apply to private employees (e.g., their salaries being public information).  This is not “unfair” or unequal, but simply part of the deal one signs up for when working for a government body.

Another claim often made by private employees is that government workers, by virtue of the pay, job security and benefits they enjoy, are artificially insulated from the realities their privately employed neighbors face — the constant threat of being fired or laid off, lack of retirement security, worry about medical bills, etc.

That might, perhaps, be true of top officials/administrators with strong political connections who make six-figure salaries, whose spouses have equally high-paying positions, and whose children or other family members are completely healthy. Otherwise, I am not so sure.

Many public employees, particularly non-union ones, are regularly threatened with layoffs or missed paychecks (most often at the end of a fiscal year). Given the poor financial standing of many public employee pension funds, combined with the fact that some public employees don’t get Social Security, I’d say many of them (including myself) who are 10 years or more away from retirement are just as worried about their retirement as you are.

Also, most public employees do not live in a bubble or a vacuum. Most used to work in the private sector at some time in their lives, and many are married to spouses who work in the “real world” or are currently unemployed or disabled. Their grown children, their parents, their siblings, and their friends and neighbors  include private employees or unemployed persons looking for work. The only exceptions I can think of might be political “dynasty” families like the Kennedys or Daleys. Plus, public employees pay all the same taxes everyone else does — federal, state, sales, property, the whole works. If taxes go up, it cuts into their budgets too.

Just because someone has a government job doesn’t mean they have, or should have, no interest in whether private business succeeds. If factories close and move overseas, if private companies go bankrupt and abolish or raid pension funds, if high taxes drive up the cost of living, if college education becomes unaffordable without taking on ruinous levels of debt — it affects them and their families too. It is in everyone’s interest, no matter what kind of job they have, to have a fiscally sound and honest government, competent public employees, and a sustainable tax structure.

Also, do not forget that for every instance in which a public official received undeserved pay, pensions or perks at taxpayer expense one could probably cite an equally egregious case of a private business executive enjoying lavish pay and benefits at the expense of fired workers, closed factories/offices, or raided pension funds. Greed is greed no matter where it occurs, and no sector of the economy is exempt from the effects of original sin.

Finally, since this is a Catholic blog, we should approach this issue from a religious perspective as well. Christ Himself chose a public employee, Matthew the tax collector, to be one of His Apostles. He also told His followers to “render unto Caesar what is Caesar’s and unto God what is God’s.” So, apparently, He did not believe that working for the government was inherently evil, unproductive or exploitive.

Some more pointed advice was given by Christ’s precursor, John the Baptist, to the public servants of his day who came to see him (Luke 3:12-14):

“Even tax collectors came to be baptized and they said to him, “Teacher, what should we do?”
He answered them, “Stop collecting more than what is prescribed.”
Soldiers also asked him, “And what is it that we should do?” He told them, “Do not practice extortion, do not falsely accuse anyone, and be satisfied with your wages.”

John was referring to practices for which the public employees of the day were notorious — tax collectors often overcharged citizens and pocketed the “profit” they made, while Roman soldiers were known for shaking down citizens of the provinces they occupied for money, food, or other goods. Here John is telling them simply to do their duty, not demand any more of the public than the law requires, and be content with what they are paid. If today’s public officials and employees did the same, there would be a lot fewer problems.

As with most problems in a fallen world, there is no perfectly just way to balance the need for a professional, competent government workforce with that of a private sector free of unnecessary taxes and regulation. This does not mean, however, that we should not attempt to find as just a resolution as possible. However this will require people who are not to blame for the situation to help clean it up, and at considerable personal cost.

For public employees, this means more work for less pay, more out of pocket expenses, and for some, no job at all. For the rest of us it could mean higher taxes, reduced services or some combination of the two. All these things will impact thousands, even millions, of good, hardworking people who are simply doing the best they can and had no part in creating the situation. It may not be perfectly fair, but life ain’t fair.

18 Responses to Are Public Employees Overpaid?

  • Teresa says:

    Excellent Post, Elaine!!

    But… I would like to raise a couple of points.

    Also, do not forget that for every instance in which a public official received undeserved pay, pensions or perks at taxpayer expense one could probably cite an equally egregious case of a private business executive enjoying lavish pay and benefits at the expense of fired workers, closed factories/offices, or raided pension funds. Greed is greed no matter where it occurs, and no sector of the economy is exempt from the effects of original sin.

    While I do agree that greed is a problem in some cases, I believe that there are instances where people can be too judgemental of a person who is wealthy or “rich” in the private sector who has been successful in life. Some may perceive a particular “rich” person as being greedy but in actuality that person may give to causes and foundations but we just may not know about it. Maybe, they want to donate and not have it spread across the news? Both envy and jealousy are also sins.

    In the private sector businesses usually either make it or they don’t, whereas with the public sector the workers or that particular government program can pretty much count on being bailed out, and if “needed” taxes will be raised or a new tax will be implemented without having the taxpayers consent, in most cases. Plus, the private sector doesn’t usually get bailouts as they did under Bush and Obama. And, that was only a few companies.

    Private sector jobs do not force people to patronage them like the public sector demands taxpayers to pay taxes to be subsidized by the public. Yes, the “little guy” usually draws the short straw and is the one to pay. While I believe that layoffs are a terrible thing, do you honestly think that a successful entrepreneur who started his/her own business, been in business for a number of years,and is being affected by the downturn should be the one to “pay” the consequences of downturn? The business person/owner may not be the employee who is being layed off, and probably doesn’t want to layoff any employees but in actuality he may feel compelled to layoff some employees just to keep his/her business afloat in tough economic times.

    When I lived in MD, the property tax prices were skyrocketing ( one lady’s taxes went from $300 to $900 in one year) because of how much the teachers and government bureaucrats in the Dept. of Education were being overpaid so the taxpayers voted on a ballot initiative to limit their increases to 2% per year. I believe there needs to be a cap on the amount of pay increase that ALL public sector employees may receive each year- maybe at 2%?

  • Elaine Krewer says:

    I’m not saying that ALL private sector layoffs are evil or motivated by greed, but mainly thinking of those really infamous cases like Enron or cases that involved actual fraud or embezzlement.

    Mainly I’m just saying that I’d prefer not to see the same kind of class warfare rhetoric that conservatives find so offensive when applied to the private sector rich in general, being applied to public sector workers in general — i.e. demonizing them as all lazy, unproductive, corrupt, etc, the way liberals do to the “rich.”

  • Paul D says:

    While this post displays a sense of justice toward individuals whether they be employed by the public or private sectors it also seems to operate on the premise that their is some level of equivalency between the two.

    From an economic and social justice perspective the goal ought to be minimizing the number of government employees and maximizing the number of private sector employees. How we get there can be debated but this needs to be the fundamental premise.

  • G-Veg says:

    I’ve been in the civil service for 16 years. During most of that time, study after study showed us to be greatly underpaid for our work. During the Clinton Administration – a period of unparalleled economic prosperity – the Administration repeatedly sought to limit pay and benefits increases because the government sought to pay down debt. Until quite recently, getting candidates for other than starting-level jobs has been quite difficult.

    I’m not complaining. I believe that I am paid fairly for my work. However, the present complaints about civil service pay are really quite silly. Most of our jobs were scarce sought after during better economic periods. It is only during economic downturns that people are anxious for public sector employment.

    Really, this has nothing to do with pay… It has EVERYTHING to do with uncertainty. The complaint is spurred by the uncertainty of the private sector. Job uncertainty is terrifying and unpleasant and many feel that it is just not fair that the public sector has job security. I’d wager that lower wages would not make those complaining feel any better. They feel like we need to be punished. We need to suffer job uncertainty. We need to fear the loss of our station in life if “fairness” shall reign. In other words, everyone should suffer together.

    It is hardly a Christian sentiment but is surely is a human one.

  • Donald R. McClarey says:

    “At a time when workers’ pay and benefits have stagnated, federal employees’ average compensation has grown to more than double what private sector workers earn, a USA TODAY analysis finds.
    Federal workers have been awarded bigger average pay and benefit increases than private employees for nine years in a row. The compensation gap between federal and private workers has doubled in the past decade.

    Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation, according to the Bureau of Economic Analysis. The data are the latest available.

    The federal compensation advantage has grown from $30,415 in 2000 to $61,998 last year.

    Public employee unions say the compensation gap reflects the increasingly high level of skill and education required for most federal jobs and the government contracting out lower-paid jobs to the private sector in recent years.

    “The data are not useful for a direct public-private pay comparison,” says Colleen Kelley, president of the National Treasury Employees Union.

    Chris Edwards, a budget analyst at the libertarian Cato Institute, thinks otherwise. “Can’t we now all agree that federal workers are overpaid and do something about it?” he asks.”

    http://www.usatoday.com/money/economy/income/2010-08-10-1Afedpay10_ST_N.htm

  • Teresa says:

    In my above post “patronage” is supposed to be “patronize”.

    @Donald

    You make an excellent point! Why is there so much disparity of pay between private sector and public sector jobs? And, these days much of what the government does is filled with wasteful projects, and the money could be allocated in a much better fashion.

    @Elaine

    While some government employees are not corrupt and unproductive others are indeed corrupt and unproductive ( I am in no way saying you are corrupt or unproductive). There isn’t really class warfare being engaged by those criticizing the employees pay in the public sector but rather taxpayers are wanting our monies to be allocated properly, and not wastefully used on excesses, as is happening in our government Today. When the taxpayers are responsible for subsidizing those who work in the public sector and not those employees in the private sector than it isn’t a double standard to criticize one group and not the other. There are different circumstances and relationships involved between the taxpayers and these two groups of employees.

  • Paul Zummo says:

    I’m a private sector employee in a sea of public sector employees. On the one hand, it isn’t exactly fair to compare government workers to private employees when they are, on average, more highly educated. Something like 80 percent of the population in the DC metro area have some form of graduate degree, and obviously many of these work for in the public sector. Based on education and experience, I would say the public sector compensation is largely fair.

    That said, there is a comfort level that public sector employees enjoy that those in the private sector do not. While strictly speaking it’s not impossible to be fired, it is a bit more difficult to get the axe if you work for the government at any level. Are many public sector jobs superfluous? Yeah, and I say that as someone who had such a job back when I still lived and worked for the city of New York. We had pretty much an entire agency where five people could have done the job of the 30 or 40 of us that were there.

    I think the question isn’t whether public sector employees are overpaid (they’re not), but rather whether or not there are simply too many of them (there probably are).

  • Donald R. McClarey says:

    A good analysis of the comparison of public and private compensation:

    http://reason.org/news/show/public-sector-private-sector-salary

    I think differing education levels between public and private employees are somewhat misleading. I have a secretary who has been with me for 25 years. She is a high school graduate. She is also bright, hard working, a superb organizer and an excellent learner. She manages my office and assists me with the litigation portion of my practice. During the past 25 years she has attained a good practical grasp of legal procedures. I have no doubt that if the roles she fills were staffed according to federal job procedures, I would have at least two employees, one with an Associates Degree and the other with a BA. In the private sector my secretary has the skills and the jobs but not the educational credentials.

  • j. christian says:

    I think the question isn’t whether public sector employees are overpaid (they’re not), but rather whether or not there are simply too many of them (there probably are).

    Paul’s conclusion is correct. I recently began working for the federal government, and the problem isn’t so much that federal workers are overpaid and lazy, but that there are way too many statutory requirements driving their workload.

    Let me give you an example:

    A story hits the newspapers; the Dept. of Defense paid $700 for a screwdriver. Never mind the fact that this is probably mostly a fluke of cost averaging in some account ledger; Joe Q. Taxpayer is outraged! Our Congresscritters listen; they pass a law called the Defense Acquisition Workers Improvement Act (DAWIA – Google it, if you’ve never heard of this lovely). Henceforth, all federal civilian workers in the defense contracting field must take five bazillion hours of training in How Not To Pay $700 For A Screwdriver. Congratulations, America – you’re now paying $100,000 to save $695 on a screwdriver.

  • Phillip says:

    I think NRO recently looked at this. As noted public employees tend to be better educated. Part of this is certain govt. programs that reimburse for classes thus encouraging better education. Controlling for better education (as well as a number of other factors noted) public employess still make about 12% more than private sector employees.

  • Elaine Krewer says:

    “Henceforth, all federal civilian workers in the defense contracting field must take five bazillion hours of training in How Not To Pay $700 For A Screwdriver.”

    The running joke of the last few years among State of Illinois employees is the so-called “ethics test,” an online training tool in Q & A format which all workers have to complete once a year. When you complete it, that fact is registered electronically and you also have to print out a certificate to sign and present to your supervisor.

    Many of the right answers are or should be obvious to anyone with a modicum of common sense and honesty, and it could easily be completed in about 10 minutes by experienced State employees who are familiar with the subject matter, questions and answers. However, there have been cases of employees “flunking” the test — not being registered as having completed it — because they completed it that quickly. In order to avoid this, many workers resort to dilatory tactics such as taking coffee or bathroom breaks in the middle of the “test” so they don’t finish it too fast.

    Of course, the biggest irony surrounding the ethics test is that it was instituted by Governor Hairdo as a way of demonstrating his commitment to reform in state government.

  • Pinky says:

    This is a very good article and discussion.

    With regard to education, we have a big problem in this country revolving around discrimination law. An employer doesn’t look for the best person for the job; he looks for the person he can document is the most qualified person for the job. The bigger the organization, the greater the priority on quantifiable credentials. The open secret is that degrees don’t make you a better worker. But HR isn’t looking for better workers.

  • Pinky says:

    Oops. Let me finish that thought. I’d like to see less consideration of a person’s academics in determining his wages. Under our current thinking, it’s reasonable to have the best-educated workforce the government can get, and it’s reasonable that they should be paid more on the basis of their education. But that way of thinking is wrong. Ultimately, it’s unjust.

  • j. christian says:

    Elaine,

    The economic consequence of this kind of legislation (whether it’s your ethics example or my DAWIA example) is that it takes time away from doing actual work. Unless there’s a corresponding return on that training investment (which I strongly doubt), it’s spending more dollars than dollars saved. Marginal cost exceeds marginal benefit. And it requires that the government hire more FTEs for the same amount of work.

    Why not do a better job of screening new hires in the first place? In my experience, that’s what the private sector does better. They don’t require their employees to take hundreds of hours of training because they’re confident that they’re getting people with the right experience or, at the very least, are smart enough to figure out their new jobs. My #1 complaint (so far) working for the government is, they don’t treat their people like adults. Sometimes that attitude is deserved, but for most of us, it’s insulting and wastes our time. I have graduate degrees and 12+ years of professional work experience; do I *really* need to take that course in report writing???

  • j. christian says:

    I’d like to see less consideration of a person’s academics in determining his wages.

    Ideally, public sector wages would have some relationship to value marginal product of labor. But how do you measure government “output?” If the federal agency that employs me were eliminated tomorrow, the Earth would go on turning just fine. However, it’s also likely that we’d see fraud, waste, and all sorts of bad outcomes creep up over time if went to a completely self-policing regime. So our “product” is probably worth something more than $0 and less than the hundreds of millions of dollars budgeted for it.

  • Dennis Larkin says:

    Most of us know public sector and private sector employees who are overpaid and others who are underpaid. It is people who may or may not be overpaid.

    Recalling E.F. Schumacher somewhere in Small Is Beautiful, only something like 4% of modern society actually produces something tangible of real worth. The remaining 96% of us sell it, warehouse it, advertise it, account for it, legislate about it, sue about it, transport it, broadcast about it, blog about it, keep tabs on it, deal with warranty claims about it, stock and shelve it, scan it, accept payment for it, put it on layaway, display it, and on and on. Most of us work in a world of electronic digits. Actually productive citizens are few and far between, says Schumacher. I think he’s dead right.

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