Wednesday, March 16, 2011

State and Local Employee Compensation

The New York Times had a great set of graphics on March 7 entitled “Are State and Local Government Employees Paid too Much?”

This is big news with the moves in New Jersey since last year, and in Wisconsin this year, to rein in public employees’ unions.

And, of course, it’s a big deal in macroeconomics because most of the goods and services bought by the government are actually compensation costs of labor.

So, what do the graphs show?

  • Public employee compensation has been pulling away from that in the private sector for about a generation (is the scale of axes appropriate?)
  • The difference in benefits is bigger than that in salary.
  • But, government workers tend to have more degrees (which often lead to better pay).
  • Separations (remember those) are low for public employees.

To an economist, the best way to analyze the importance of this is to look at a subset for which most of the qualities like these are matched. And if you look at clerical workers, they get compensated a lot more in government.

A lot of the public debate is about teachers. On this, the graphic is silent. The best way to compare this is with compensation in public vs. private schools. Utah’s paucity of private schools makes us a bad place to look for data — but most people are aware that there is a big compensation premium attached to working in the public schools.

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