Download March-15-2011-Presentation

Public versus Private Sector Workers:
A Look at Earnings, Compensation, and Economics
Are public sector workers overcompensated?
What impact does a higher standard of living for
unionized public sector workers have on the economy?
Unions and Earnings
 On average, union workers earn more than their nonunion
counterparts.
2010Weekly & Annual Union/Nonunion Earnings
Bureau of Labor Statistics
Occupation
Union
Nonunion
All workers
$917/$45,850
$717/$35,850
Differential
1.28
Production
$801/$40,050
$569/$28,450
1.41
Education
$1,008/$50,400
$811/$40,550
1.24
Health Care
$1,098/$54,900
$967/$48,350
1.14
Management
$1,187/$59,350 $1,231/$61,550
* Annual earnings estimated by multiplying weekly earnings by 50.
0.96
Public versus Private Sector Workers
 The public sector is much more likely to be unionized
compared to the private sector (36.2 v. 6.9%). Does that
mean that public sector workers earn more?
 In 2010, the BLS reports that the median weekly earnings for
a private sector worker was $864. For the public sector, it
was $961 (a ratio of 1.11).
 Chris Edwards, from the Cato Institute, reports even higher
differentials. Using 2009 BLS state and local data, Edwards
reports a 1.34 differential for salaries and a 1.45 differential
for total compensation.
Public versus Private Sector Workers
 BUT:
 Jeffrey Keefe, Rutgers University & Economic Policy Institute (2010):
Controlling for employer size, education level, experience, and work
schedule, private employees make 11% MORE in wages and 2% MORE in
total compensation than public workers.
Keefe’s Findings on Total Compensation
Data Source: 2009 IPUMS Current Population Survey
Public
Private
College Degree
$56,641
$89,041
Lawyers
$79,330
$175,141
High School Degree
$44,000
$44,000
Less than High School $41,000
$27,719
Public versus Private Sector Workers
 BUT:
 Peter Orszag, Congressional Budget Office (2007): Using 2005 data
from the Office of Personnel Management, Orszag concludes that it is
all about the training and experience.
 Public Sector Workers generally have more education. About ½ of all federal
workers have a college degree; 1/3 of the private sector does. 82% of the
pay differential between federal and private sector workers is explained by
the difference in education alone.
 Public Sector workers have more training within occupations. Nurses
working for the federal government are twice as likely to have a college
degree as those employed in the private sector( 24 v. 11%). Federal database
administrators are twice as likely to a post-baccalaureate degree compared to
their private sector counterparts (31 v. 16%).
 Public Sector workers are older and therefore have more experience (45 v. 40
years of age).
Are Ohio Public Sector Workers Overcompensated?
• Keefe on Ohio (2011):
• Ohio public sector workers earn 5.9% LESS than their private sector
counterparts in salary and 3.3% LESS in total compensation.
• Ohio state and local governments and school districts pay collegeeducated workers on average 25% less than do private employers.
• Ohio public sector workers are more educated (49 versus 26% with a
college degree) and more experienced than their private sector
counterparts (23.2 versus 21.7 years).
Are Public Sector Workers Overcompensated?
 2009 Employee Compensation Costs by the BLS:
State & Local
Private 500+ employers
Total Compensation
$40.32
$40.01
Wages (%)
65.5%
66.4%
Benefits (%)
of which:
health
retirement
34.4%
33.6%
11.6%
8.1%
8.7%
5.1%
Social Security &
Medicare
4.6%
5.7%
What about economic well-being?
•GDP per capita
•Median Family Income
•Poverty Rates
•Gini Coefficients
Right-To-Work States
Source: National Right-To-Work Legal Defense Foundation
Real GDP per capita growth rates
2006-2009
GDP is measured as the expenditures of households on goods and services plus business investment,
government expenditures, and net exports. GDI is measured as the factor incomes earned (labor and
capital income) and other costs incurred in production.
Personal Income: Percent Change
2010II-2010III
Personal income can be defined as the sum of wage and salary disbursements, supplements to wages and
salaries, proprietors’ income, dividends, interest, and rent, and personal current transfer receipts, less
contributions for government social insurance.
Median Family Income
Source: 2005-09 American Community Survey
Poverty Rates 2009
Source: US Census Bureau
2009 Gini Coefficient
Data source: US Census
Final Thoughts
Should we include future values for pension benefits in the
calculations?
a. Defined benefit versus defined contribution plans.
b. Implied contract.
2. What are the long-term effects of reducing public employee pay
and compensation?
a. Social responsibility attitudes and public sector work.
b. Incentives matter!!!
1.