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Federal Workers Wages Really Higher?

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Beefheart Posted: Wed, Mar 9 2011 7:35 PM

I am repeatedly told that 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.  On top of that,  federal compensation advantage has grown from $30,415 in 2000 to $61,998 by 2009, average federal salary has grown 33% faster than inflation since 2000, and Federal compensation has grown 36.9% since 2000 after adjusting for inflation, compared with 8.8% for private workers. Yadda, yadda, yadda.

 
BUT, these statistics appear flawed? You can't just compare two sectors equivalently, seeing as public jobs tend to focus more towards white collar work exclusively, if you compare only the two sectors where they overlap it seems the federal government pays an average of 20 percent more than private firms for comparable occupations. Which is not as great a gap as I am often told- but not just that, this difference in itself may have to do with the difference in experience/skill that isn't being taken into account by these studies. According to the Center for Economic and Policy Research (http://www.cepr.net/documents/publications/benefits-state-local-2010-04.pdf), “older and substantially better educated than private sector workers.” When CEPR compared public- and private-sector workers of similar age and education, the government workers actually earned 4 percent less. According to the  Economic Policy Institute (http://epi.3cdn.net/8808ae41b085032c0b_8um6bh5ty.pdf), saw that including benefits, state and local employees are slightly undercompensated relative to the private sector.
 
Am I missing something here? Are there better arguments out here that I'm missing? Is the market just kicking the government's ass? Why the claim that they are making more then?
 
I'm especially interested in this due to the teacher strikes, so if anyone knows of any more specific information regarding that, do let me know. Thanks!

My personal Anarcho-Capitalist flag. The symbol in the center stands for "harmony" and "protection"-- I'm hoping to illustrate the bond between order/justice and anarchy.

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I also am very interested in this question; I've been hearing a lot about unions recently (I'm from Madison).  Hopefully someone has an answer?

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Examine quit rates - that's the best way to compare.  Government workers don't quit.  That implies they have a better deal.

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This completely leaves out what job they do. Pay is a function of productivity, and government workers are not as productive as private sector workers. Many government workers might be redundant or have negative utility, they might just sit around pushing paper in inefficient bureaucracies. The problem is that we have no clue how productive government workers are, because there is no pricing mechanism to tell us. Government is a monopoly, it is not shaped by market pressures. How old and educated government workers are doesn't really matter if they just fill out unnecessary paperwork all day. In fact, that government workers are educated and experienced is a bad thing. From the standpoint of society it would be better if the government paid less valuable people to do nothing so the valuable ones could create something of value in the productive economy.

"They all look upon progressing material improvement as upon a self-acting process." - Ludwig von Mises
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Wulf replied on Thu, Mar 10 2011 9:05 AM

 

  Simple thought process conclusion that mirrored my own. I live near a large government naval civilian base and can testify to the validity of this logic. They NEVER quite, and actually when they retire, they almost always fall into a 'double dip' situation in which they 'retire' from the government on Friday with cake and ice cream, then walk back into work at the same job, same place, in the same position ... as a contracting position for a newly contracted position. 

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Wulf replied on Thu, Mar 10 2011 9:07 AM

 

 

  I was speaking of the comment made by NewLiberty 

"Examine quit rates - that's the best way to compare.  Government workers don't quit.  That implies they have a better deal."

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Examine quit rates - that's the best way to compare.  Government workers don't quit.  That implies they have a better deal.

A better deal is not necessarily a higher salary. For example, they may have less stressful jobs (or higher pensions).

The Voluntaryist Reader - read, comment, post your own.
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You can't compare private workers to state workers because the latter is outside the pricing mechanism. There's a calculation problem, the state is not shaped by market pressures to be efficient. The state is not doing economically productive work. What does it matter how educated state workers are if they are paid to do nothing? Private firms produce value, they have to or they go out of business. That's why it's an apples and oranges comparison. Just saying you have this many state workers with this much education tells you as much about how much value they create as saying you spent a ton of steel without saying what you did with it. Workers are paid according to their productivity, and government workers are vastly overpaid for how productive they are.

"They all look upon progressing material improvement as upon a self-acting process." - Ludwig von Mises
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CEPR spokespersons have advocated for progressive positions, such as continuation of funding for the Survey of Income and Program Participation, for cancellation of multilateral debt for Heavily Indebted Poor Countries (HIPC's) such as Haiti, for the International Monetary Fund to cease making loans conditional on recipient countries’ adoption of austerity measures, for policies that would allow U.S. homeowners facing foreclosure to stay in their homes by breaking the contract with the mortgage company and paying a market-determined rent, for an end to the strong dollar policy that makes U.S. exports artificially expensive, for a shorter work week to be included in current U.S. economic stimulus measures, and for the Chairman of the U.S. Federal Reserve to warn the public of the dangers of bubbles such as the recent U.S. housing bubble – the collapse of which led to the current economic downturn – among various other policies.

CEPR publishes reports and opinions on a number of issues. Its geographical focus outside the United States is primarily on Latin America, and in particular on Argentina, Bolivia and Venezuela.[7] On a number of occasions and on a variety of topics, CEPR has contributed to Congressional hearings.[8]

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cporter replied on Thu, Mar 10 2011 2:15 PM

As Nero said, you can't look at compensation of private and public jobs and make normative conclusions like one is "too high" or "too low". Value is subjective. That is what most people try to do with this data; assuming that a public lawyer should make the same as a private one, for example.

However, we can look at compensation and say what workers seem to value. The jobs themselves are in the market, so even if we can't say what one should make, because that requires producing a product to sell on the market (and public jobs don't have one), we can definitely say which job the workers themselves prefer, and quit rates are the best way to measure that.

The best study I've seen on quit rates was done in 1981 for the Navy. They found that public employees quit about 1/4 as often as private employees. Using comparisons between compensation and quit rates in private firms they estimated that this is about a 15% premium for a government job.

Below, I've market 1981 (roughly) on a chart comparing state/local governament compensation and private compensation:

 

As you can see, state/local compensation has outpaced private compensation. Curiously, quit rates are pretty equivalent to what they were then.

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Private salaries are consumed to provide for public salaries.  So whatever claim of productivity of the public sector gets shaded by the seizure of private wealth.

If both salaries were equal, it would still be bad.

I'd treat the CEPR data with some scrutiny given this organizations other positions and progressive stance.

http://www.usatoday.com/news/nation/2010-03-04-federal-pay_N.htm

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$20/h to sort mail at the post office.  Nuff said.

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