Are Public Employees Overpaid?

an article by Jeffrey Keefe (Rutgers University, NJ, USA) published in Labor Studies Journal Volume 37 Number 1 (March 2012)

Abstract

The research reported in this article shows that public employees, both state and local government employees, are not overpaid and may be slightly undercompensated. Comparisons with the private-sector employees that control for education, experience, hours of work, organizational size, gender, race, ethnicity, and disability indicate that the public-employment compensation (wages and benefits) penalty is relatively small.

On average there is a 3.7 percent penalty in total compensation for full-time state and local employees when compared to similar private-sector employees.

The data analysis also reveals substantially different approaches to staffing and compensation between the private and public sectors. On average, state and local public-sector workers are more highly educated than the private-sector workforce; 54 percent of full-time state and local public-sector workers hold at least a four-year college degree compared to 35 percent of full-time private sector workers.

For college-educated labor, state and local governments pay salaries on average over 25 percent less than private employers. The public sector appears to set a floor on compensation, particularly improving the compensation of workers with high-school educations, when compared to similarly educated workers in the private sector.

Benefits are allocated differently between private- and public-sector full-time workers. State and local government employees receive a higher portion of their compensation in the form of employer-provided benefits. Public employers provide better health insurance and pension benefits.

National polling data indicate that the public does not believe public employees are overpaid. They oppose pay and benefit cuts, but believe pay freezes and greater employee contributions to their health and pensions plans may be appropriate. Nevertheless, thirteen states revised their public-sector collective-bargaining laws, mainly weakening employee bargaining power or severely restricting or eliminating collective bargaining, while the majority of the public opposed those changes.

---