Public/Private Sector Compensation Bakeoff (PBS NewsHour Edition)

More grist for the salary mill, via Tuesday’s PBS NewsHour (video embedded):

Protests in Wisconsin, Elsewhere Stir Debate on Public vs. Private Pay, Benefits

And we take up the contentious question of public- versus private-sector pay with Harley Shaiken of the University of California, Berkeley, where he specializes in labor issues, and Chris Edwards, who works on tax and budget issues at the Cato Institute, which is dedicated to free markets and limited government.

Harley Shaiken, let’s put our cards on the table first. You don’t see public-sector employees as being overcompensated, right?

HARLEY SHAIKEN, University of California, Berkeley: Absolutely not.

And I think there’s ample data that indicate that they are not overcompensated. The average public worker in the United States earns about $49,000. But when you adjust for, as you put it earlier, education, experience, the character of the job, public workers earn — their wages are 11 percent less than those in the private sector.

If you add all the benefits into that picture, they’re 7 percent less. That’s hardly overcompensated. Are there cases in some occupations, some states where they are? Perhaps. But I think, overall, they are paid less than their private-sector counterparts, and the state really is a place where those who earn least ought — the state ought to be setting the standard for better pay, not for sweatshops, even within the constraints of a very serious fiscal situation on a state level.

JEFFREY BROWN: All right. All right. We’re going to walk through some of those.

But, Chris Edwards, first, your cards here. You see an unhealthy balance in the — how the public sector employees are compensated.

CHRIS EDWARDS, Cato Institute: I think, for state and local workers, their wages on average across the country are pretty well in line with the private sector. Teachers and police and fire, the academic studies I have seen, the wages are pretty reasonable and competitive.

It’s the benefits where the state and local workers have a huge advantage. And to give you a couple examples, virtually all full-time state and local workers get old-fashioned defined benefit pension plans that are typically very generous. Private-sector workers, very few of them get these defined benefit pension plans anymore.

So these government pension plans are far more lucrative generally than private sector 401(k) plans. Secondly, virtually all full-time state and local workers get retiree health subsidies. So, the typical worker state-local retires at, say, age 55 or 56. Then they get 10 years of health care subsidies before the federal Medicare kicks in.

That’s the type of benefits that people in the private sector simply don’t get. And finally, as your piece pointed out, public-sector workers get a lot more job stability. They have huge job stability, which has a value. So, a private sector teacher earning $40,000 and a government teacher earning $40,000, they’re not exactly comparable, because the government worker has a much more stable job.

Discuss among yourselves.

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