Managers and Professionals: Public Sector Compensation Gains Have been Bigger

In the comments to my previous post, people raised a very valid question: Maybe the difference between the public and private sectors reflected the difference in the composition of the workforce. 

So I did the same exercise for managers and professionals in the public and private sector.  Here is the chart.

The lines are bouncier because I had to use data that was not seasonally adjusted. But the basic trends are the same–since early 2005, real compensation gains for public sector managers and professionals have outstripped the compensation gains for private sector managers and professionals.  The gap is somewhat smaller than in the previous post, but it’s still there.

Now, let’s agree what this chart does not say. It doesn’t say whether public sector workers are paid more or less than their private sector counterparts, especially  after adjusting for age and education (a thank you to Dean Baker who pointed this out to me).  It also doesn’t say whether private sector pay will rebound faster in the recovery.  But it does help suggest why states and cities are struggling financially.

Comments

  1. L.A.O. says:

    Indeed, the public sector advantage is looking more irrefutable. I have insufficient data to defend it, just a thin smattering of anecdotal evidence, but I suspect that the public sector employees have not picked up the progressively greater share of health care costs that have been transferred to private sector employees, and that could account for well over half of the difference, if not all. In cases where lives are risked on our behalf, that may be justified, but for the rest, probably not.

    I have no idea how health insurers approach groups for the public sector, but if a modest sized town pays like a small business, then they are probably being gouged.

    I am still shocked that this data seems to say that public service pays — that is not the perception of job seekers. It doesn’t sync with the reality that my town’s employees increasingly report that they can no longer afford to live here as they did in the past, nor have I seen any rush to join the ranks of teachers because of the fantastic pay.

    • L.A.O. says:

      Excuse me, I think that there is an incorrect assumption in my comment that the levels of pay + benefits were initially the same in the public and private sectors — public service may actually pay less but it could be catching up to the private sector, or the cost of providing benefits is outpacing private employers, or both.

  2. L.A.O., I agree. I think health care costs are a central part of this story. Public unions are appreciably stronger than their private counterparts, and a key demand of theirs–as we saw in the debate over the “Cadillac tax” in health care–is high health care benefits.

  3. Pay is likely lower. Just think of what all the lawyers and judges would make in the private sector. It is largely a matter of prestige, perks, and platforms for higher office that are the reward for them. OTOH they have rich benefits from fully paid family healthcare to pensions worth double what the private sector offered when they offered them. Rarely does the private sector offer more than a 401k match anymore if that. That is worth roughly 12% of salary alone, if they will ever collect it given how badly funded most are.

  4. There’s more on this issue on EMSI’s blog: http://www.economicmodeling.com/2010/05/06/federal-vs-private-sector-wages-compensation/

    Included are the top 25 occupations employed by the federal government — as well as earnings for those occupations across other industries. For the majority of the occupations, the federal sector pays more than other industries. The data, however, do not account for cost-of-living differences if federal employees tend to be more concentrated than private sector employees in areas with higher cost of living.

  5. Many public sector employees have unions. Yes, those evil unions who implement collective bargaining instead of workers being subject to divide-and-conquer.

Trackbacks

  1. […] what about state and local public sector jobs? The studies may not be as comprehensive, but the evidence looks very much the same. Anecdotally, I know that every time salaries and benefit packages earned by public officials in my […]

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