The grass is perennially greener on the other side of the fence, so it’s little wonder that much thought — and even more indignation — has arisen regarding who has it better: employees of state and local governments, or those in the private sector.
A consensus only seems to start to form when speaking strictly in terms of wages and benefits. A recent Bureau of Labor Statistics report on employee benefits points out that, for example, public union workers’ share of premiums for medical coverage are lower compared to their counterparts: 13 percent for single coverage and 16 percent for family, compared to 23 percent for single coverage and 35 percent for family among private industry, nonunion workers. The same report noted private sector employees receive holidays off of work at a slightly higher rate than public employees.
Regarding the picture in terms of pay: Even though most public sector state and local jobs require higher-than-average education and training, wages are usually lower. Many observers figure that better benefits off set the difference. But there are so many pieces to the puzzle that it’s hard to reach a definitive conclusion.
One of the intriguing papers on the subject has been written by Dr. Jeffrey Keefe, who authored it for the Economic Policy Institute, dated Oct. 13, 2015. It’s titled “Eliminating Fair Share Fees and Making Public Employment ‘Right to Work’ Would Increase the Pay Penalty for Working in State and Local Government,” and it addresses some of the issues of public vs. private pay and benefits.
According to David Bensman, professor of American Labor History at Rutger’s University, “Keefe’s analysis is a lot more detailed and accurate than the Bureau of Labor Statistics’, because the BLS data compared apples and oranges whereas Keefe and the people he cited compared data about similar works.”
The main findings of the report include:
• Twenty-five states now have right-to-work laws that are applied to public-sector workers.
• State and local government employees earn less than similar private-sector workers, even though their education level — the most important predictor of earnings — is often higher; however, they receive better health benefits and pensions. Previous research has found a public-sector compensation “penalty” — how much less they earn in wages and benefits than comparable private sector workers — of 2 percent to 11 percent. Studies alleging that public employees are overcompensated do not control for skill levels and education.
• The current public employee union wage boost of 5 to 8 percent is rather modest and considerably less than the boost that private sector unions provide. Th us, public employee unions, on average, do not raise wages to meet the wages paid to similar private sector employees.
• Only public employees in states with full collective bargaining make as much as their private-sector peers. Using American Community Survey data, this report finds that the public-sector pay penalty is 1 percent in non-RTW states and 10 percent in RTW states, a net compensation penalty of 9 percent.
• Consistently, regardless of the data, methods or period, the public-sector union wage premium is half of what is reported for private- sector union employees and appears to be declining over time. Pooled analysis from 2009–14 reveals a public sector union wage premium of 8 percent and a compensation premium of 9 percent compared with nonunion public employees.
• Most research has shown that firefighters have benefited from collective bargaining particularly because it reduced their weekly hours. Early studies from police unions found they were associated with higher earnings — a 2014 study by Fransden determined 5 percent — but studies also revealed a difficulty in isolating a union wage effect because of what is referred to as “spillover effect,” where nonunion employees set wages, and most likely benefits, to be comparable to those in surrounding communities.
• Approximately 30 percent of public-sector employees are not covered by Social Security. Pensions are mostly legislated by state and local governments and are not collectively bargained.
• Public employee unions do have some ability to negotiate health benefits. Public employees receive similar health benefits as private-sector workers, but public employees are much more likely to participate in employer-provided benefits.
• Four studies conducted from 2010–14 cited by Keefe in this paper comparing public and private sector employee compensation concluded that public sector employees are under-compensated between 2 and 11 percent.
Keefe’s conclusions as to why include: Many Americans do not like to pay taxes, especially when they don’t understand the public services they receive in return; politicians often promise lower taxes and improved services by cutting waste; the public sector — particularly K-12 education, which accounts for about 53 percent — has historically taken advantage of paying females less; state and local governments rely on property taxes, and homeowners resist increases in property taxes; state and local government jobs have historically produced stable employment and pensions plans, encourage employees to remain in those jobs; and lastly, some of the most difficult jobs for public employees are in former industrialized cities that have high crime rates, high poverty rates and few jobs with an inadequate tax base to address the challenges.
Further information and a contradictory opinion can be found on pg. 20 of this magazine. Whichever way your research and experience leans, we hope this month of May finds you both appropriately compensated and fulfilled for the effort you give every day to keeping your city up and running.