How Did the Wage / Benefit Gap Between Public and Private Sectors Get So Huge?

Having first been tipped off to this particular set of data via this item over at the Daily Bail, the details behind the charts get even more interesting the further you look.

In short, the gap between wages and benefits between federal workers and the private sector has grown to stunning proportions and is accelerating rapidly.

As if the wage differential isn't bad enough - some $29,000 a year! - while private sector workers now get an average of about $10,000 in benefits every year, the average federal worker receives a stunning $41,000 in benefits.

The average combined wages and benefits for federal workers is $120,000!!!!

As a point of reference, this is about $8,000 higher than computer system designers.

Chris Edwards at the Cato@Liberty blog had a look at the most recent data from the Commerce Department and put together a few charts in this post over the weekend which are just mind-boggling.

They are certainly worthy of a little poking around by yours truly who has long marveled at how well gubment workers have made out over the last ten years, after successfully playing catchup (and then some) following the big wage gains in the private sector during the 1990s.

Anyway, here's the news from Cato:

Federal Pay Continues Rapid Ascent
Posted by Chris Edwards

The Bureau of Economic Analysis has released its annual data on compensation levels by industry (Tables 6.2D, 6.3D, and 6.6D here). The data show that the pay advantage enjoyed by federal civilian workers over private-sector workers continues to expand.

The George W. Bush years were very lucrative for federal workers. In 2000, the average compensation (wages and benefits) of federal workers was 66 percent higher than the average compensation in the U.S. private sector. The new data show that average federal compensation is now more than double the average in the private sector.

Figure 1 looks at average wages. In 2008, the average wage for 1.9 million federal civilian workers was $79,197, which compared to an average $50,028 for the nation’s 108 million private sector workers (measured in full-time equivalents). The figure shows that the federal pay advantage (the gap between the lines) is steadily increasing.
Figure 2 shows that the federal advantage is even more pronounced when worker benefits are included. In 2008, federal worker compensation averaged a remarkable $119,982, which was more than double the private sector average of $59,909.
What is going on here?

Good question...

There are a couple of follow-ups on this - responses to some rather heated questions and comments by federal workers (surprise!) were provided here and more employment categories were charted here.

I just can't get over the fact that millions of federal employees get $31,000 more per year in benefits than the private sector.

Note: According to Labor Department data, total government employment stands at 22.3 million which includes 14.4 million at the local level, 5.2 million working at state governments, and 2.8 million at the federal government level. Presumably, the data above refers to the 2.8 million.

Comments

[Alan Young:]

I am fairly confident that this is NOT an apples-to-apples comparison.

First, no comparisons were made to similar job descriptions and duties, but just across the entire universe of employees in the sector. Most Federal agencies now outsource the cheapest jobs like trash collection and cafeteria work, so that's all private sector; even the Army hires contractors to provide meals (at least in some places) rather than training their own cooks. (This was certainly not true in the Beetle Bailey era; probably started shifting under Reagan). So most Federal employees are now professionals of some sort.

Second, Social Security is a private-sector benefit, Was it counted? (Probably not, since the private sector employer only pays a fraction of it). Was the federal pension benefit, which is a substitute for SS, counted as a federal employee benefit? (Probably so). I'll bet my AAPL to your MSFT that this accounts for most of the discrepancy in the benefits.

This is just off the top of my head--I am NOT an employment-benefits specialist, but I can recognize a straw man when I see one.

If you are depending on the Cato Institute to be objective about this kind of data, I have a nice bridge to sell you. This is an organization which is devoted to trying to persuade people not to trust the government. I never did trust the government, but I trust Cato even less: their agenda is monolithically political.

Oct 27 04:40 PM

[Pat C:]

I'm with Alan Young, could be true but nothing from Cato is objective.

Oct 27 04:52 PM

[Tony Petroski:]

From the article:

"What is going on here?

Good question..."

Let me try. For all the talk of "too big to fail" (tell me how many too-big-to-fail institutions have been wound down since the panic of a year ago?) the biggest too-big-to-fail institution of all is the U.S. Federal government. Combine that with a unionized workforce manning that monopoly and you have a formula for rapid wage and benefits inflation.

A good question is this: Can the parasite ever get larger than the host it is feeding on?

Oct 27 04:59 PM

[g452ooo:]

I sure hope this depression-nee-recession keeps on dragging its recovery feet, so that government rolls will finally start being nibbled down to retaining those who actually DO SOMETHING in any given workday. From a former government contractor who spent 36 years doing the work that my government counterpart analyst/scientist didn't/couldn't/wouldn't, I saw so many useless drones on the dole doing nothing, nada, all day, that it was pitiful. As the influx of taxes and fees dwindles due to pervasive job loss in the private sector, public job cuts MUST begin in earnest, getting trimmed, and chopped down. If this continues unabated, I expect uprisings to begin, targeting the government workers, tax resistance, growing to more overt actions like Waco, Ruby Ridge by a growing crop of Timothy McVeigh wanna-bes.

Oct 27 05:55 PM

[Roger Knights:]

One very objective indicator of overpayment is the quit rate. Workers in overpaid niches quit less frequently than their cohorts elsewhere, because better paying jobs aren't available. The last time I heard about the quit rate for federal workers, it was much lower than the rate in private industry.

Give them all a 33% haircut and let them live on their fat.

Oct 27 08:50 PM

[derryl:]

"Give them all a 33% haircut and let them live on their fat."

I agree with Roger. Benefits are the big ticket item in this equation. I would argue that because public sector workers receive 100% of their compensation from taxpayers, no government worker should receive higher benefits than the average in the private taxpaying sector. That would be the 33% haircut right there.

I would go further. Corporate oligopolies enjoy supportive legislation and market pricing power that enables them to compete with public sector compensation and benefits. Consumers subsidize this excessive compensation by paying higher prices. So I would say public sector benefits cannot be higher than the average paid by small to medium businesses who employ about 2/3 of all workers. That would bring public sector benefits pretty close to the $zero that most small business workers (and owners) get.

I don't care about "apples to apples" comparisons. So what if governments hire more 'professionals' with degrees. What's the market value of a gender equity consultant, in a free market where gender equity is not first mandated by the government? The market value is zero, not $120k per year, no matter how many degrees the worthless employee holds.

Even where public sector professionals do useful work like ensure engineering standards are met on projects, government "safety nazi" regulation and bureaucratic overkill ensures the projects are either overspec'd or mal-spec'd which multiplies their costs without producing any appreciable gains in safety or other benefits.

Many modern university degree programs are in a closed loop with government social engineering. Those programs and the jobs they lead to could not exist in a free economy because they generate zero economic value and zero social value. They are make work programs pure and simple, but the 'workers' doing those public jobs are actually a cost to the private businesses that have to endure their interference, not a benefit of any kind.

Shakespeare had it right, "First, we kill all the lawyers." Legalism makes the law and justice excessively complex so that ordinary people cannot understand the law and get justice without going though the lawyers. The lawyers interpose themselves as a tax on everybody's life. Modern bureaucrats do exactly the same thing. They are parasites, not 'economic contributors'.

As for public sector arguments that, "We pay taxes too!": if a parasite sucks a gallon of your blood and gives you back a quart that parasite has still cost you 3 quarts of blood. The public sector is a mosquito bloated on private sector blood. We do to mosquitos the same thing Shakespeare advocated for lawyers. Apples to apples?

Oct 27 09:28 PM

[OldSusanna:]

Derryl; you rock! Your thoughts complement Tim's comments perfectly--the gender equity consultant illustration was pure gold (or if you listen to some, better make that platinum). I wonder if mosquitoes ever explode (or otherwise perish) from that one, last, (too) long drink?

Oct 27 11:22 PM

[JudeJin:]

derryl, you are the man!

Oct 28 12:49 AM

[Moon Kil Woong:]

It's called collective bargaining and the fact that their employer doesn't have to deal with real market forces. Now you know why government buraucrats are completely disconnected to the market when crafting any solutions that help the general public. They aren't the general public.

2009-2010 will be a great time for Federal workers as their departmental budgets mushroom. This is the Obama definition of stimulus. I suppose it's better than the Bush Jr's definition of dumping 100s opf thousands of young Americans in a desert somewhere with no real mission, but not by much.

Oct 28 02:27 AM

[Tony Petroski:]

Moon Kil Woong.

Bush Jr. didn't "dump" hundreds of thousands of young Americans in a desert somewhere with no real mission.

He made the case and acted on it. Both parties signed on to the mission and funded it. The soldiers themselves, volunteers, are the most enthusiastic about the mission.

Bush didn't call his actions "stimulus."

Those same young Americans are still there even though the Obama administration is closing in on their anniversary in office.
Is the Obama "stimulus" better (as you say) than the Bush method? Well how about both at the same time?

Oct 28 08:53 AM

[Albert Meyer:]

Moon Kil Woong.

"Bush Jr. didn't "dump" hundreds of thousands of young Americans in a desert somewhere with no real mission." - Moon Kil Woong
("We have to protect the integrity of the United Nations," he said.")

The mission was to annex the oil fields of Iraq and payback Sadam for cheating his dad on an oil deal decades ago. US oil services companies (Cheney's buddies) were lining up to make billions.

Bush lied, our barve men and women died; and are still dying. Millions of Iraqi's are refugees, thousands innocent Iraqis died needlessly.

Track the cost of this disaster here:

costofwar.com/

Oct 28 09:40 AM

[ctjaeger:]

Wow, how did this degrade into a "Bush lied..." discussion.

Oct 28 11:42 AM

[Zmartmoney:]

No, but the parasite is perfectly willing and able to keep the host deathly sick and on its knees for a very long time....can't really kill the host, now, can we?
I can't wait to add another 100,000 "health care bureaucrats" to the payroll - that would be the "on its knees" part referenced above. There are way too many people in the wagon instead of helping pull it.


On Oct 27 04:59 PM Tony Petroski wrote:

> From the article:
>
> "What is going on here?
>
> Good question..."
>
> Let me try. For all the talk of "too big to fail" (tell me how many
> too-big-to-fail institutions have been wound down since the panic
> of a year ago?) the biggest too-big-to-fail institution of all is
> the U.S. Federal government. Combine that with a unionized workforce
> manning that monopoly and you have a formula for rapid wage and benefits
> inflation.
>
> A good question is this: Can the parasite ever get larger than the
> host it is feeding on?

Oct 28 12:58 PM

[Zmartmoney:]

You know Moon, you were doing fine until you ventured off into the bar ditch trying to bash Bush. You should confine your more intelligent posts to one topic at a time. The first point you made was valid, and well taken, and a warning to us all. However, many will be affronted by the insinuation that Bush was trying to do "stimulus." Even on a very slow news day I would find it hard to characterize Iraq on that basis. The complexities are why it's so easy to argue about, with much more smoke than fire.


On Oct 28 02:27 AM Moon Kil Woong wrote:

> It's called collective bargaining and the fact that their employer
> doesn't have to deal with real market forces. Now you know why government
> buraucrats are completely disconnected to the market when crafting
> any solutions that help the general public. They aren't the general
> public.
>
> 2009-2010 will be a great time for Federal workers as their departmental
> budgets mushroom. This is the Obama definition of stimulus. I suppose
> it's better than the Bush Jr's definition of dumping 100s opf thousands
> of young Americans in a desert somewhere with no real mission, but
> not by much.

Oct 28 01:06 PM

[Wildhawk:]

The apples-to-oranges comments are absolutely correct, and those that argue otherwise either don't understand statistics (averages versus medians) or don't have the foggiest idea about the types of jobs that are being compared in public versus private sectors.

Here's a link to the 2009 federal pay grade scale:
www.opm.gov/oca/09tabl...

There deserves to be considerable discussion over whether or not the types of jobs the government employs are really necessary, and there deserves to be considerable discussion about the richness of government benefits in comparison to private sector workers. However, the pay debate is completely misguided. Most government "professionals" make orders-of-magnitude less pay than they could otherwise make in private industry. If you truly compare comparable professional jobs in the private sector versus the public sector, the debate is not even close: private sector jobs make laughably more money on a total compensation basis than public sector jobs, even when you factor in benefit loads.

Oct 28 02:46 PM