Friday, May 25, 2007

Two Americas: Public vs. Private Sector Empoyees

From today's Detroit News: According to the Michigan Department of Labor and Economic Growth the average pay in 2006 for state government employees was $49,660. For private-sector workers, the comparable figure was $42,588. That's a difference of close to 17 percent.

And state employees often receive more generous health and retirement benefits than private sector employees. While new state employees receive 401(k)-type retirement contributions, older employees still receive pensions. Michigan civil service employees receive benefits equal on average to 54% of base payroll; nationally, private sector workers on average receive benefits equal to 41% of base payroll.

The Detroit News cites a Mackinac Center study "What Price Government?" that details higher salaries for public sector jobs compared to comparable private sector jobs.

Yes, there are Two Americas in Michigan: One for those work for the government and another for those in the private sector.


At 5/27/2007 4:25 PM, Anonymous Anonymous said...

Couldn't part of the difference in pay be from an educational premium? Controlling for education, what's the pay difference? I am assuming since most government workers are teachers, police officers, and fire fighters (source: BLS), the educational attainment level of government workers is higher than private industry, but I could be mistaken.

In addition, I know one of the factors could be a union premium. My research finds union membership for government workers in 2006 at 36.2% and private industry at 7.4% (combined 12%, which is down from 12.5% in 2005. Source: BLS 1/25/2007).

Your conclusion that there are “Two Americas” is true on the surface; however, rational explanations exist to support that’s the way it should be. Even if an actual disparity exists after controlling for all the factors, the flip side of the evidence and the conclusion you supplied could easily be that the private sector pay is too low and the pay in government is the correct amount, so the workers in the private sector are being underpaid.

I am not a big fan of government, but it’s way too easy to bash the rich, government, and union workers. None of these groups are politically correct nowadays, but all of society's problems can't be traced to income disparities. If we hope to find the root cause of problems, we need to separate fallacies from fact.

At 5/27/2007 4:29 PM, Anonymous Anonymous said...

Correction to a quantifier in my earlier post: Many goverrnment workers are teachers, police officers, and fire fighters.

At 5/27/2007 8:54 PM, Anonymous Anonymous said...

walt g.

from the article:

"But the fact is, as the Mackinac Center study points out, state government also tends to pay more for the same job than the private sector. The range of the costs for salary and benefits for a receptionist in state government in the Mackinac Center study was $42,200 to $59,700 per year. For the same position, the study said, the Lansing Chamber of Commerce would pay $30,200 to $34,400 in salary and benefits."

At 5/27/2007 10:19 PM, Anonymous Anonymous said...

Are teachers government employees?? I know that property taxes pay for the schools, but I did not make the direct connection that teachers were paid by the state. I was under the impression that the individual school districts, employed the teachers.

At 5/28/2007 8:04 AM, Blogger juandos said...

"Couldn't part of the difference in pay be from an educational premium?"...

For teaching?!?! LOL!

Actually I can see that the education for police and fire department personnel should have a premium attached but for teachers, not a chance...

At 5/28/2007 9:08 AM, Anonymous Anonymous said...

The article compared same jobs, but not educational attainment levels. We can't assume they are the same. Being in an MPA program, I am surprised at the number of low-level government workers in my classes. Accordingly, when you call a government office, don't be surprised if the receptionist has a college degree. I'm not sure that's the case in the private sector. In addition, many government workers have to take a Civil Service exam that might raise the bar for like positions in the private sector.

As you can see, it might not be possible to compare the same jobs in the private and public sector. However, even if we could, an objective view would at least consider that the private-sector employees were underpaid. You have to have preconceived notions to choose sides with no more information than was supplied in Balfour’s Mackinaw Center for Public Policy article. If I were an impartial arbitrator who had to strictly choose one amount of pay or the other, I would want to see more information before I made my decision.

Yes, teachers in public, but not private, schools are considered government workers. That’s what makes them public.


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