Government Workers Not Overpaid

[Toro]

In fact, adjusted for education and hours worked government workers appear to be underpaid. It is especially true in the professions, such as law, accounting and finance, where people are dramatically underpaid relative to the private market. In my profession - investments - government workers are often paid 10% to 20% of what people make in similar positions in the private sector.

The government’s workforce is more educated than the private workforce. For instance, the government’s “college plus” level is 54%, while all private workforce is 35%. “Some college” is 14% of government workers, 19% of the private workforce. So this is important to control for.

Here is the penalty government workers take when you include all benefits across both categories:

On average, government workers make 3% less total compensation when you control for education levels. As someone who once considered doing regulatory work with his professional Master’s degree work, I can completely agree that there’s a 30%+ pay gap between the public and private sector.

Are Government Employees Overpaid? Still No. Rortybomb

 

[boedicca]

This study is bunk. It does not include defined benefit pension costs on the thin pretext that such pensions are not currently fully funded.

Try again.

 

[william the wie]

My objection to this study is that it omits the academic, think tank, industry, lobby and lecture circuit revolving door not to mention the liability costs associated with the private sector.

 

[code1211]

In fact, adjusted for education and hours worked government workers appear to be underpaid. It is especially true in the professions, such as law, accounting and finance, where people are dramatically underpaid relative to the private market. In my profession - investments - government workers are often paid 10% to 20% of what people make in similar positions in the private sector.

The government’s workforce is more educated than the private workforce. For instance, the government’s “college plus” level is 54%, while all private workforce is 35%. “Some college” is 14% of government workers, 19% of the private workforce. So this is important to control for.

Here is the penalty government workers take when you include all benefits across both categories:

On average, government workers make 3% less total compensation when you control for education levels. As someone who once considered doing regulatory work with his professional Master’s degree work, I can completely agree that there’s a 30%+ pay gap between the public and private sector.

Are Government Employees Overpaid? Still No. Rortybomb

I see.

It's not that the Government workers who are actually in the real world in real dollars making just shy of twice what the people who are not government workers make.

It's that the people who are government workers are actually better people than those not in the government and therefore what they make needs to be more and when one sticks one's head far enough up one's arse one is able to see this.

How clever. Thanks for explaining this.

 

[DrSporK]

In relation to the actual work done, government employees should be making roughly half of what the private sector makes.

Furthermore the private sector pays for ability not entitlement. A highly sought out private defense attorney should be making way more than a local prosecutor.

-SporK

 

[Toro]

This study is bunk. It does not include defined benefit pension costs on the thin pretext that such pensions are not currently fully funded.

Try again.

Read again.

I'll paste the entire part of the link since you couldn't be bothered to actually read it, yet proffered an opinion nonetheless.

Three

Last step. Now there is a third critique, lead by Andrew Bigg of AEI, which says that doesn’t get the entire costs of providing benefits because “most state and local employees also become eligible for defined-benefit pensions and health benefits in retirement. But state and local governments haven’t come close to fully funding these obligations. That means that the amount government employers spend today may be well less than what employees will actually receive when they retire.” He believes this is not the case for private employers, hence government workers are likely overpaid.

Let’s hand the microphone to the National Institute on Retirement, which is specifically addressing Bigg’s claims (my bold):

Some have argued that because many public pension plans around the country are not fully funded, the entire cost of defined benefit (DB) pension benefits is not recognized in the data we used in our study, which comes from the National Compensation Survey (NCS). While the NCS, like any survey, does have some limitations, it remains the definitive source researchers use for assessing the cost to employers of non-wage benefits…

In other words, if an employer fails to fully pay for the benefits accrued in any given year, than it is possible that the cost of the pension benefit—and therefore, the full cost of employee compensation—may be slightly understated in the data. The corollary to this is that if an employer’s contributions to a pension plan exceed the cost of benefits accrued in that year, the NCS will overstate the cost. Because employer contributions can vary with the funded status of the plan, which in turn, is driven by macro-economic factors like theperformance of stock and bond markets, there may be a cyclical bias in the data. Over time, though, these over- or under-estimates should average out, which is why we used an average (from 2004 to 2008) of benefit costs, rather than a point estimate in our analysis. Moreover, it is important to note that any bias (positive or negative) would apply equally to public or private sector employers.

So, claims that our analysis systematically understates costs for public employers are invalid on this basis.

Similarly, claims that our study should have added the value of the entire unfunded liability (of state and local government DB plans) onto a single year’s compensation costs are completely off base. Any analysis that does so will reach conclusions that are equally inappropriate and flawed.

First, an unfunded liability represents all accrued benefits, from all years past, that are not currently funded. Yet the point of the analysis is to compare the cost of annual compensation. Therefore, it is inappropriate to include the entire unfunded liability from all prior years into the calculation of the cost of benefits in a single year.

Second, even if one felt that incorporating the cost of unfunded liabilities served a purpose (notwithstanding that this is not how economists define current compensation), one would have to apply the same standard to the private sector side of the analysis, too. Currently, many private sector DB plans have unfunded liabilities—a result of the recent stock market downturn that affected investors of all stripes. If the idea is to compare public and private pension costs in a fair, “apples to apples” manner, then the unfunded liabilities of private sector pensions should be calculated as well.

Third, adding the expected annual cost of paying off unfunded liabilities (even under the worst-case scenario) would not change the result.

The Center for Retirement Research at Boston College recently calculated that it will cost states on average just 2.2% of payrolls to pay off their entire unfunded liability over 30 years. In the Out of Balance report, we found that total compensation is 6.8% lower for state government employees and 7.4% lower for local government employees than for comparable private sector workers. So, even if we were to add 2.2% of payroll to state and local employee compensation—which would pay off the entire unfunded liability—state and local workers would still be paid 4.6% and 5.2% less, respectively, than their private sector counterparts.

In conclusion, the results of the Out of Balance study stand up to scrutiny. Even acknowledging the additional contributions that will be required to restore pensions to full funding does not alter the ultimate findings of the study. State and local employees still receive significantly less total compensation than their counterparts in the private sector.

Posted on July 19, 2010 by: Keith A. Bender, Associate Professor and John S. Heywood, Distinguished Professor; Department of Economics, University of Wisconsin-Milwaukee.​

The idea that the private market pensions are in tip-top shape doesn’t strike me as accurate, and piling on the entire unfunded liability into a single year is, of course, going to distort the scales and not focus on the specific hypothesis testing that is being carried out. And yes, even if we were expecting to pay off the entire unfunded liability we are talking about 2.2% of payroll, still less than what NIR, EPI and others found as the pay gap.

 

[Toro]

I see.

It's not that the Government workers who are actually in the real world in real dollars making just shy of twice what the people who are not government workers make.

It's that the people who are government workers are actually better people than those not in the government and therefore what they make needs to be more and when one sticks one's head far enough up one's arse one is able to see this.

How clever. Thanks for explaining this.

The more educated one is, the more one makes. Someone with a Ph.D. in molecular biology generally makes more money in his job than a high school drop-out who works at 7/11. This should be self-evident. This is as true in the private sector than in the public sector. In fact, it is more so because those at the top of the wage scale get paid astronomically more than those at the bottom, which doesn't happen in the public sector.

 

[Ravi]

Speaking as a former government employee I have to agree that they (we) were not overpaid.

Once upon a time civil service was something that was honorable.

Why and when did all that change?

 

[william the wie]

Toro, I would imagine you saw the same thing in Canada that happens here: Robert Rubin leaving Treasury to make over $100 million with Citi at what even he called a nothing job, the professor who brags about how his undersecretaryship got him tenure and so on ad nauseum. It is the Government Service merit badge and its revenues that causes the problems.

 

[Revere]

Junk stats. They don't include public employee pensions which are drilling all levels of the government solvency in to the grouds.

 

[loosecannon]

In fact, adjusted for education and hours worked government workers appear to be underpaid. It is especially true in the professions, such as law, accounting and finance, where people are dramatically underpaid relative to the private market. In my profession - investments - government workers are often paid 10% to 20% of what people make in similar positions in the private sector.

The government’s workforce is more educated than the private workforce. For instance, the government’s “college plus” level is 54%, while all private workforce is 35%. “Some college” is 14% of government workers, 19% of the private workforce. So this is important to control for.

Here is the penalty government workers take when you include all benefits across both categories:

On average, government workers make 3% less total compensation when you control for education levels. As someone who once considered doing regulatory work with his professional Master’s degree work, I can completely agree that there’s a 30%+ pay gap between the public and private sector.

Are Government Employees Overpaid? Still No. Rortybomb

This is really skewed Toro. It might be completely true but it is still misleading. Nearly half of government services are provided by contractors who do earn far more than public sector equivalents. Esp in the military and intelligence realm where contractors replace public sector personel and earn 3-4 times as much in salary.

But all of that is a direct subsidy provided from the very budgets and departments compared in your study.

If we discontinued all private contracting in intelligence and military operations the values in your study would be dramatically impacted.

 

[Toro]

Toro, I would imagine you saw the same thing in Canada that happens here: Robert Rubin leaving Treasury to make over $100 million with Citi at what even he called a nothing job, the professor who brags about how his undersecretaryship got him tenure and so on ad nauseum. It is the Government Service merit badge and its revenues that causes the problems.

Generally, you don't see such pay packages in Canada.

 

[Granny]

Having worked in both the public and private sector I would have to say that some government employees are way overpaid than private sector employees doing the same job. Other public sector employees who are higher up the scale and know their job get paid on a decent level and they deserve to get higher pay.

In terms of actual positive work productivity, the public sector employee is way less productive than private sector employees. Get three sheets of paper on their desk and they hit the panic button and demand the department hire another worker because this one is overworked. Private sector employees can go through reams of paper, get through several different processing steps and get the finished product out the door and never miss a deadline - even if that deadline is only a couple hours away.

Public sector employees are not expected to think - they just follow the guidelines. Private sector employees are expected to be independent thinkers who can make good, quick decisions on the spur of the moment.

Public sector employees will not start work one minute before 8:30 a.m. and will not work one minute past 4:30 p.m. God forbid a call should come in at 4:29 - it will not be answered. Private sector employees who are conscientious workers will arrive at work early and leave late, work through lunch hours, or whatever it takes to get the job done.

Public sector employees get a hell of a lot of benefits, whereas some private sector employees get no benefits, some benefits, good benefits or damned good benefits.

Public sector employees get more paid holidays than do private sector employees. If "Winnie-the-Pooh Day" was a federal holiday, they would get that off too.

My experience has been that government employees simply can't function in the private sector workplace.

 

[boedicca]

This study is bunk. It does not include defined benefit pension costs on the thin pretext that such pensions are not currently fully funded.

Try again.

Read again.

I'll paste the entire part of the link since you couldn't be bothered to actually read it, yet proffered an opinion nonetheless.

Three

Last step. Now there is a third critique, lead by Andrew Bigg of AEI, which says that doesn’t get the entire costs of providing benefits because “most state and local employees also become eligible for defined-benefit pensions and health benefits in retirement. But state and local governments haven’t come close to fully funding these obligations. That means that the amount government employers spend today may be well less than what employees will actually receive when they retire.” He believes this is not the case for private employers, hence government workers are likely overpaid.

Let’s hand the microphone to the National Institute on Retirement, which is specifically addressing Bigg’s claims (my bold):

Some have argued that because many public pension plans around the country are not fully funded, the entire cost of defined benefit (DB) pension benefits is not recognized in the data we used in our study, which comes from the National Compensation Survey (NCS). While the NCS, like any survey, does have some limitations, it remains the definitive source researchers use for assessing the cost to employers of non-wage benefits…

In other words, if an employer fails to fully pay for the benefits accrued in any given year, than it is possible that the cost of the pension benefit—and therefore, the full cost of employee compensation—may be slightly understated in the data. The corollary to this is that if an employer’s contributions to a pension plan exceed the cost of benefits accrued in that year, the NCS will overstate the cost. Because employer contributions can vary with the funded status of the plan, which in turn, is driven by macro-economic factors like theperformance of stock and bond markets, there may be a cyclical bias in the data. Over time, though, these over- or under-estimates should average out, which is why we used an average (from 2004 to 2008) of benefit costs, rather than a point estimate in our analysis. Moreover, it is important to note that any bias (positive or negative) would apply equally to public or private sector employers.

So, claims that our analysis systematically understates costs for public employers are invalid on this basis.

Similarly, claims that our study should have added the value of the entire unfunded liability (of state and local government DB plans) onto a single year’s compensation costs are completely off base. Any analysis that does so will reach conclusions that are equally inappropriate and flawed.

First, an unfunded liability represents all accrued benefits, from all years past, that are not currently funded. Yet the point of the analysis is to compare the cost of annual compensation. Therefore, it is inappropriate to include the entire unfunded liability from all prior years into the calculation of the cost of benefits in a single year.

Second, even if one felt that incorporating the cost of unfunded liabilities served a purpose (notwithstanding that this is not how economists define current compensation), one would have to apply the same standard to the private sector side of the analysis, too. Currently, many private sector DB plans have unfunded liabilities—a result of the recent stock market downturn that affected investors of all stripes. If the idea is to compare public and private pension costs in a fair, “apples to apples” manner, then the unfunded liabilities of private sector pensions should be calculated as well.

Third, adding the expected annual cost of paying off unfunded liabilities (even under the worst-case scenario) would not change the result.

The Center for Retirement Research at Boston College recently calculated that it will cost states on average just 2.2% of payrolls to pay off their entire unfunded liability over 30 years. In the Out of Balance report, we found that total compensation is 6.8% lower for state government employees and 7.4% lower for local government employees than for comparable private sector workers. So, even if we were to add 2.2% of payroll to state and local employee compensation—which would pay off the entire unfunded liability—state and local workers would still be paid 4.6% and 5.2% less, respectively, than their private sector counterparts.

In conclusion, the results of the Out of Balance study stand up to scrutiny. Even acknowledging the additional contributions that will be required to restore pensions to full funding does not alter the ultimate findings of the study. State and local employees still receive significantly less total compensation than their counterparts in the private sector.

Posted on July 19, 2010 by: Keith A. Bender, Associate Professor and John S. Heywood, Distinguished Professor; Department of Economics, University of Wisconsin-Milwaukee.​

The idea that the private market pensions are in tip-top shape doesn’t strike me as accurate, and piling on the entire unfunded liability into a single year is, of course, going to distort the scales and not focus on the specific hypothesis testing that is being carried out. And yes, even if we were expecting to pay off the entire unfunded liability we are talking about 2.2% of payroll, still less than what NIR, EPI and others found as the pay gap.

I read it again. And I stand by my assessment. The data excludes the amount required to fully fund the pension on an annual contribution basis. It's a distorted manipulation to understate the true cost to the taxpayer for these overpaid parasites.

 

[McDowell's]

This study is bunk. It does not include defined benefit pension costs on the thin pretext that such pensions are not currently fully funded.

Try again.

Read again.

I'll paste the entire part of the link since you couldn't be bothered to actually read it, yet proffered an opinion nonetheless.

Three

Last step. Now there is a third critique, lead by Andrew Bigg of AEI, which says that doesn’t get the entire costs of providing benefits because “most state and local employees also become eligible for defined-benefit pensions and health benefits in retirement. But state and local governments haven’t come close to fully funding these obligations. That means that the amount government employers spend today may be well less than what employees will actually receive when they retire.” He believes this is not the case for private employers, hence government workers are likely overpaid.

Let’s hand the microphone to the National Institute on Retirement, which is specifically addressing Bigg’s claims (my bold):

Some have argued that because many public pension plans around the country are not fully funded, the entire cost of defined benefit (DB) pension benefits is not recognized in the data we used in our study, which comes from the National Compensation Survey (NCS). While the NCS, like any survey, does have some limitations, it remains the definitive source researchers use for assessing the cost to employers of non-wage benefits…

In other words, if an employer fails to fully pay for the benefits accrued in any given year, than it is possible that the cost of the pension benefit—and therefore, the full cost of employee compensation—may be slightly understated in the data. The corollary to this is that if an employer’s contributions to a pension plan exceed the cost of benefits accrued in that year, the NCS will overstate the cost. Because employer contributions can vary with the funded status of the plan, which in turn, is driven by macro-economic factors like theperformance of stock and bond markets, there may be a cyclical bias in the data. Over time, though, these over- or under-estimates should average out, which is why we used an average (from 2004 to 2008) of benefit costs, rather than a point estimate in our analysis. Moreover, it is important to note that any bias (positive or negative) would apply equally to public or private sector employers.

So, claims that our analysis systematically understates costs for public employers are invalid on this basis.

Similarly, claims that our study should have added the value of the entire unfunded liability (of state and local government DB plans) onto a single year’s compensation costs are completely off base. Any analysis that does so will reach conclusions that are equally inappropriate and flawed.

First, an unfunded liability represents all accrued benefits, from all years past, that are not currently funded. Yet the point of the analysis is to compare the cost of annual compensation. Therefore, it is inappropriate to include the entire unfunded liability from all prior years into the calculation of the cost of benefits in a single year.

Second, even if one felt that incorporating the cost of unfunded liabilities served a purpose (notwithstanding that this is not how economists define current compensation), one would have to apply the same standard to the private sector side of the analysis, too. Currently, many private sector DB plans have unfunded liabilities—a result of the recent stock market downturn that affected investors of all stripes. If the idea is to compare public and private pension costs in a fair, “apples to apples” manner, then the unfunded liabilities of private sector pensions should be calculated as well.

Third, adding the expected annual cost of paying off unfunded liabilities (even under the worst-case scenario) would not change the result.

The Center for Retirement Research at Boston College recently calculated that it will cost states on average just 2.2% of payrolls to pay off their entire unfunded liability over 30 years. In the Out of Balance report, we found that total compensation is 6.8% lower for state government employees and 7.4% lower for local government employees than for comparable private sector workers. So, even if we were to add 2.2% of payroll to state and local employee compensation—which would pay off the entire unfunded liability—state and local workers would still be paid 4.6% and 5.2% less, respectively, than their private sector counterparts.

In conclusion, the results of the Out of Balance study stand up to scrutiny. Even acknowledging the additional contributions that will be required to restore pensions to full funding does not alter the ultimate findings of the study. State and local employees still receive significantly less total compensation than their counterparts in the private sector.

Posted on July 19, 2010 by: Keith A. Bender, Associate Professor and John S. Heywood, Distinguished Professor; Department of Economics, University of Wisconsin-Milwaukee.​

The idea that the private market pensions are in tip-top shape doesn’t strike me as accurate, and piling on the entire unfunded liability into a single year is, of course, going to distort the scales and not focus on the specific hypothesis testing that is being carried out. And yes, even if we were expecting to pay off the entire unfunded liability we are talking about 2.2% of payroll, still less than what NIR, EPI and others found as the pay gap.

I read it again. And I stand by my assessment. The data excludes the amount required to fully fund the pension on an annual contribution basis. It's a distorted manipulation to understate the true cost to the taxpayer for these overpaid parasites.

Not to mention the fact that while the pension "bias" would affect public and private employers similarly, a much greater percentage of public sector employees have defined benefit pensions. So the "bias" would have a more significant impact on the estimation of public sector pay as a whole.

 

[boedicca]

Indeed. And the Public Employee Unions have colluded with elected Politicians to ensure that pension contracts cannot be renegotiated.

 

[Picaro]

The reason government workers are targets of the pseudo-conservatives' Talking Points Tree is because they're among the last group of workers left whose wages and bennies have been modestly adjusted for inflation for the last 30 years, and serve as an embarrassment to how far behind 'private' sector wages have fallen. Even Federal workers' wages have fallen some 20% behind real inflation, while many 'private' sector' jobs are paying some 40% to 60% less than 30 years ago. The Republican controlled Congress of 1995 of course eliminated food and energy from the CPI index the Fed uses for COLA adjustments, even though inflation has rarely fell below 4% a year, and during Bush II reached 8% a year some years, using the 'old' CPI index.

We shouldn't forget that it was a Republican President who added over a million workers to the government payroll, and Republicans have never been concerned about 'The Deficit' when they're in power; Reagan, Bush I, and Bush II were never much concerned about it, so just chalk up the current 'viral marketing' going on with the sniveling about 'overpaid Federal workers', 'Social Security collapse!', "OMG OMG OMG THE DEFICIT!!!!!!" as just lying hubris from the usual sociopaths who really really love class warfare, no matter how pointless and irrelevant it is to the real problems, pretty much on a par with the pseudo-liberals' virulent anti-semitism, advocacy of Gay Privilege, criminal illegal aliens, and general promotion of ethnic nationalism and racism among minorities.

 

[Picaro]

Indeed. And the Public Employee Unions have colluded with elected Politicians to ensure that pension contracts cannot be renegotiated.

As opposed to how the 'private' sector handles pensions which is to simply steal them and divide the funds up as executive 'bonuses' the day before filing bankruptcy, or simply never fund them in the first place.

 

[Toro]

I read it again. And I stand by my assessment. The data excludes the amount required to fully fund the pension on an annual contribution basis. It's a distorted manipulation to understate the true cost to the taxpayer for these overpaid parasites.

The data does not exclude the amounts required. That's what that study stated. It would cost 2.2% IF you were to pay off the unfunded liability, of which that same methodology does not apply in a like-for-like comparison with the private sector. It is less if you also do it for the private sector. Government workers are still not overpaid relative to the private sector if that is baked in.

 

[Toro]

Not to mention the fact that while the pension "bias" would affect public and private employers similarly, a much greater percentage of public sector employees have defined benefit pensions. So the "bias" would have a more significant impact on the estimation of public sector pay as a whole.

Though you are correct in that the private sector tends to rely moreso on defined contribution plan, the adjustment in the study accounted only for defined benefit plans in the public sector. It assumed a zero in the private sector. Since there are unfunded defined benefit plans in the private sector, the number is greater than zero, and thus the bias is less than the 2.2%, not more.