Who Makes More, Government Employees or Private Sector?

In a comment on a previous article [The Need for Bigger Government] dmarks sited from the “Sunshine State New: Nearly one of every four federal workers makes more than $100,000 annually, a USA Today study shows.

Twenty-two percent of federal employees earned more than $100,000 last year, up from 12 percent in 2006.

The average federal salary in 2011 was $75,296, plus $28,323 in medical, pension and other benefits -- about 60 percent more than the private-sector average.

I found that interesting but made me wonder if we are comparing apples to oranges; more specifically the corresponding jobs in government in comparison to the private sector, not just averages or even medians.

I checked out this link from a Google search: http://smallbusiness.chron.com/differences-between-government-employment-private-sectors-10104.html

There I discovered that government workers indeed get great benefits: health insurance, dental insurance, vacation, and retirement benefits. They also have a lot of job security.

Private sectors employees face a more vulnerable market. They point out that in 2009 government workers averaged the highest at $67,756, with private-sector averaging $45,155 and local government employees averaged $43,140.

However, when you compare exact occupations such as doctors, CPA’s, and the like, a person in the private sector averages more. This is what I expected. But I think it is still a sticky wicket and hard to make real comparisons. Educations levels I think play heavily into these comparisons.

CNN points out that Federal workers with master’s degrees or doctorates do better that those in the private sector. However, those with professional degrees or doctorates do less well that those in the private sector.

CNN also reports that the White House said that the president will propose a 0.5% increase for federal workers in 2013 which is less that the 2% increase in privates wages this past year.

Here are the conclusions from the Reason Foundation http://reason.org/news/show/public-sector-private-sector-salary

Conclusions

While the recent study from the Center for State & Local Government Excellence and the National Institute on Retirement Security comparing public sector and private sector compensation levels correctly notes that aggregate comparisons of average public and private wages and benefits can be misleading, its conclusion that state and local government employees are undercompensated, compared to private-sector employees, is suspect at best.  The analysis ignores the value of virtually ironclad job security and certainty of pension benefits, features that are notably absent in the private sector.  It also overlooks the greater efficiency and productivity of private sector workers, which is a result of competitive pressures not experienced in government agencies. The conclusion that public-sector workers are more highly educated than comparable private sector workers, upon which higher pay and benefit levels is justified, is called into question by the fact that not all college degrees are equal (and may vary between public and private sector employees) and the possibility that governments are hiring overqualified workers because they face looser budget constraints than private companies (i.e., governments are overpaying for their labor).

There are other considerations outside the scope of the report that affect discussions of the cost of government services.  Since retiree health care costs are expected to continue to rise rapidly, and public employees' retiree health care benefits are significantly greater than those of private sector employees, this will increase government workers' total compensation relative to comparable private sector employee compensation.  Furthermore, even if we assume that public employees are underpaid, or at least not overpaid, that does not mean that the number of government workers is necessary or desirable, or that the cost and scope of government is not excessive.

The fact is that state and local government labor costs are continuing to escalate drastically.  There is a reason why the City of Vallejo, California, cited skyrocketing pension costs as the chief cause of its fall into municipal bankruptcy, and why many other local governments in California and elsewhere are on the brink of bankruptcy.  There is a reason why California's pension costs have been described as unsustainable by everyone from the chief actuary of the California Public Employees' Retirement System to Republican Gov. Arnold Schwarzenegger, to Democratic State Treasurer Bill Lockyer. There is a reason that governments at the federal, state, and local levels achieve significant cost savings by contracting with private sector businesses to provide a wide variety of services previously performed by government workers.  State and local governments in California and across the nation must address public employee compensation levels if they are to maintain any sense of fiscal responsibility, particularly in these difficult economic times.

Adam B. Summers is a policy analyst at Reason Foundation.

As I said, I think the comparisons are hard to make and you have to dig a little deeper to get a fuller picture in comparing compensation between the private and public sector. Even when you dig further folk reach different conclusions depending of the values you emphasize. One thing that came into clearer focus for me in the importance of job security which is stronger in the public versus the private sector. Other countries appear to have met that challenge better, for instance Japan but also the majority of other developed countries. Another good study to make.