American politics

Democracy in America

Wisconsin public unions

Don't join the government to get rich

Feb 21st 2011, 14:55 by M.S.

ONE of the memes being thrown around over the past few years by advocates of reducing the power of public-sector unions has been the claim that public-sector workers are overpaid in comparison to their private-sector counterparts. I've always considered this an odd claim to hear, as I've been in the labour market for quite a long time and can't recall ever hearing anyone say they were going to work for a government bureaucracy because they wanted to make a lot of money. At crucial career-making junctures in life, people who want to get rich tend to enter corporate law rather than join the District Attorney's office, to work for internet companies rather than teach math in public high schools, and so forth.

All of this is coming up now because Wisconsin has become the showdown state for the public-sector union controversy, and Scott Walker, the governor, is claiming he needs to destroy the state's public-sector unions' ability to negotiate in order to deal with its budget shortfall. State workers, he says, are paid too much. But the Economic Policy Institute tells us that, in Wisconsin, public-sector workers are not in fact paid more than their private-sector counterparts. They're paid less. You can only make it appear that public-sector workers earn more by ignoring the fact that "both nationally and within Wisconsin, public sector workers are significantly more educated than their private sector counterparts."

Nationally, 54% of full-time state and local public sector workers hold at least a four-year college degree, compared with 35% of full-time private sector workers. In Wisconsin, the difference is even greater: 59% of full-time Wisconsin public sector workers hold at least a four-year college degree, compared with 30% of full-time private sector workers.

...Public employees receive substantially lower wages, but much better benefits than their private sector counterparts. Wisconsin state and local governments pay public employees 14.2% lower annual wages than comparable private sector employees. On an hourly basis, they earn 10.7% less in wages. College-educated employees earn on average 28% less in wages and 25% less in total compensation in the public sector than in the private sector.

The EPI study does find there's a class of public-sector workers who earn a bit more than their private-sector counterparts: those without high-school degrees. In other words, district attorneys earn less than corporate lawyers, but janitors at the district attorney's office may earn more than janitors at a corporate law office—provided the government hasn't outsourced its facilities staff to the same private company the law office uses, which it may have, since governments have been targeting low-skilled workers for outsourcing precisely because that's how they can save money.

For most people who work for the government, however, the expectation is that your year-to-year salary will be lower, but your benefits will be better, in particular your pension. It turns out, however, that state governments won't have the money to pay a lot of those pensions. They're likely to renege on their promises, and Republicans in Congress want to allow them to declare bankruptcy in order to do so. (Funnily enough, this may be the one area in which labour unions and Wall Street are in alliance: neither one wants states to be allowed to declare bankruptcy.) In other words, as Ezra Klein points out, the public-sector employees got rooked: they accepted lower pay in exchange for retirement benefits, and now the retirement benefits look unlikely to come through.

Now, how can we explain the fact that public-sector employees are paid less than private-sector employees? After all, public-sector employees are heavily unionised, while private-sector employees aren't. Shouldn't those unions be winning public-sector employees better wages? Well, I don't really know; perhaps the fact that the government is a monopoly employer with staggering market power has something to do with it. But try considering how employees' wage negotiations with the government might look if there were no public-sector unions. In most lines of work, individuals' power to negotiate higher wages with large organisations is very limited. In government employment, individuals' power to negotiate higher wages is utterly non-existent. An individual teacher who bargains with a private school for a higher wage than her peers is going to have a tough negotiation on her hands; an individual teacher who tries to bargain with the City of Milwaukee for a higher wage than her peers is going to be laughed out of the superintendent's office. In his initial post on this subject, my colleague ventured that civil servants would constitute a powerful bloc able to protect their wages even without unions. I'm not really sure what this means. Through what mechanism are civil servants supposed to bargain for wage increases if they don't have unions? Who's supposed to do the bargaining?

You must be logged in to post a comment.
Please login or sign up for a free account.
1-20 of 141
Dan112 wrote:
Feb 21st 2011 3:25 GMT

"You can only make it appear that public-sector workers earn more by ignoring the fact that "both nationally and within Wisconsin, public sector workers are significantly more educated than their private sector counterparts."

You can only make it appear they're paid more ignoring the fact they don't even work 75% of the year.

Dan112 wrote:
Feb 21st 2011 3:27 GMT

Sorry,

Should have read something like...they work less than 75% of the year.

My apologies.

Feb 21st 2011 3:42 GMT

This post is laughably disingenuous. People join the public sector workforce because they want a steady source of income with great benefits at a job where they can work hard on the days they're feeling inspired, not work hard on any other days, never fear getting fired for being useless, and where a 4-year degree from UW Parkside in education (what?) followed by a Master's in Physical Education from UWGB is valued at the same level as a real degree in a real subject from a real university.
The public sector by and large attracts people for whom it's an advantage to have a system that can be milked. It's a giant sieve that catches those people who are willing to trade a 50% effort for a 90% paycheck.

rpeterso wrote:
Feb 21st 2011 3:51 GMT

I would almost say shockingly disingenuous, but I'm not always 100% certain that M.S. knows when he's picking sources that are more or less guaranteed to produce the sort of result he's looking for.

KSStein wrote:
Feb 21st 2011 3:53 GMT

Wisconsin's proposal allows public workers to continue to bargain collectively for wages, which directly addresses you concern about bargaining power. So the focus of your post is irrelevent to the dispute.

The issue is in the current system, public unions have the power to elect the people who decide their wages and benefits. This is the fundamental contradiction with public sector unions. A politician elected and controlled by a public sector union cannot and will not negotiate with the best interests of the taxpayers in mind. This is precisely how the states have gotten saddled with the penion obligations which you point out are so unaffordable.

Something has to change, the status quo is unaffordable. Rather than claiming nothing is wrong, the unions would do better to come up with alternatives, maybe you should write a post on that.

arupkumarsaha wrote:
Feb 21st 2011 3:57 GMT

It is ridiculous that when taxpayers are loosing jobs/benefits , then tax consumers are demanding more and more from the shrinking tax revenue pie !! Please note that public salary or benefit does not depend on education level but the requirement of the taxpayer and the ability of the taxpayer to pay. If the taxpayer does not want to pay higher salary/benefit then any public sector employee is free to choose another employer if she thinks that salary or benefit is not as per her education level. If some one says that she is overqualified and accepting a low paying (?) public sector job even though she can earn a lot more in public sector then I take it with a grain of salt.

Feb 21st 2011 3:58 GMT

There is an excellent piece by the BBC statistics programme 'More or Less' on the same issue in the UK:

http://www.bbc.co.uk/programmes/b00tq1vk#synopsis

It notes some interesting parallels: for example that managers tend to do better in the private sector and lower end workers (who are similarly being oustourced) do better in the public sector.

One key point that the piece makes is that the issue of comparing like with like is both crucial and extremely difficult.

francisbjohn wrote:
Feb 21st 2011 3:59 GMT

The issue has never been about pay so much as its about benefits. There are practically no pensions left in the private sector, but public employees have generous pensions that often allow them to retire early too. Add this to their gold-plated health plans which they pay little for either in premiums or in co-pays (where I live in Ohio teacher co-pays are just $15 per doctor visit) and that's why this is such an issue. Then if we add in other less tangible benefits like greater job security and fewer hours worked per year, it becomes hard to argue that public employees are getting a raw deal in any significant way.

It's a complex issue to put on paper and compare, but anyone who has been in both worlds like me will tell you that public employees are getting a very good deal even with cuts.

Feb 21st 2011 4:07 GMT

"Nationally, 54% of full-time state and local public sector workers hold at least a four-year college degree, compared with 35% of full-time private sector workers. In Wisconsin, the difference is even greater: 59% of full-time Wisconsin public sector workers hold at least a four-year college degree, compared with 30% of full-time private sector workers."

Nationally, what percentage of full-time state and local public sector workers are teachers?

willstewart wrote:
Feb 21st 2011 4:13 GMT

It has been pointed out before that unions, like other organisations, in practice bargain for their own rather than their members' maximum advantage. This on the whole means going for more employees (members) rather than fewer, more highly paid ones. Thus unionised state enterprises tend to be overstaffed and lower paid.

I think this solves your conundrum - and one can easily list disputes where the issue was 'preserving jobs', even if the jobs were unfilled. QED.

JGradus wrote:
Feb 21st 2011 4:15 GMT

I don't know that much about the US government, and it seems to be a bit inefficient at times, but I would like to ask about how many of you bashing government employees how actually work for the state or have worked close enough to actually now?

I only now my old home country, which in difference from the US is known for having quite skilled public workers, but in Sweden they really are extremely underpaid and somehow labeled "as not real workers" just because they're salaries are publicly financed.

Feb 21st 2011 4:39 GMT

"People join the public sector workforce because they want a steady source of income with great benefits at a job where they can work hard on the days they're feeling inspired, not work hard on any other days, never fear getting fired for being useless, and where a 4-year degree from UW Parkside in education (what?) followed by a Master's in Physical Education from UWGB is valued at the same level as a real degree in a real subject from a real university."

I guess experiences can differ, as the public servants I know went to Harvard, Oberlin, and Cornell, among others. Though now that you mention it, some did get degrees in government, which people in economics didn't think was a real subject.

Doug Pascover wrote:
Feb 21st 2011 4:41 GMT

I don't really blame the public employee unions for the low cost of buying their bosses. There's a big problem with public employee pensions and it needs to be fixed but, frankly, that's our (the voter's) problem. As to whether public employees aren't held accountable due to union rules, I think they aren't held accountable due to civil service rules that persist where there is and where there isn't a public employee union. Unionized private sector workers probably don't get fired for being useless because of union workers. Nonunionized private sector workers don't get fired for being useless because their managers are also useless and there's a bond there.

JGradus asks whether the commenters running down public employees have ever worked for government. I wonder if they've worked in the private sector. I also note that we all have time to comment on this here blog.

chelau wrote:
Feb 21st 2011 4:42 GMT

Here comes the right's smokescreen again. Creating an illusion that the teacher unions negotiating for higher than fair compensation is the root of the state's budget problem in order to lower taxes for corporations and maintain historically low taxes for the rich. The right is brilliant in pitching the middle/lower classes against each other as to draw attention from the fact that revenue shortfalls can (and in this case did) contribute budget problems as much as spending can.

I have my problems with unions - but this has more to do with performance rather than pay; after all if the employer agreed to the negotiated pay rate, it means that the pay was acceptable to the employer (whether or not the employer likes the level of pay is irrelevant)to begin with. I think the teacher unions has a lot to do with the sub-par performance of American schools, but I do not believe that they are unfairly paid for their role - in fact, I think the role of teachers should be paid more.

Walker is an excellent politician...an evil politician...but he is playing the game exactly as any right-wing figure do: drawing the public battles and scrutiny away from the rich.

Djyrn wrote:
Feb 21st 2011 4:44 GMT

Just going off of experience, I don't know that public sector workers are peopled with the lazy, who only took the job because it offers a steady stream of income. I only know three people in such jobs and none of them are particularly lazy. Two of them started in the military and gravitated towards those jobs because of the background. The rhetoric on this is rather empty when it comes to dealing with real people.

I do wonder about the numbers. My wife has 20 years of teaching in private schools and she makes significantly less than she woud in the public schools. I don't think that's the case throughout government, but for this one sector of the government the education workforce is large enough to lead one to question the numbers of government workers making more than their private sector peers.

Feb 21st 2011 4:56 GMT

All that work for another post that nobody falls for. Keep trying MS.

ADAs aren't unionized. You generally can't negotiate higher wages at big law firms. Those at small firms and Legal Aid often make less than ADAs. Private school teachers make less than public school teachers. I give up. The errors are too numerous.

If public sector unions are really as ineffective as MS claims, why not get rid of them?

Feb 21st 2011 4:58 GMT

MS~
Your eight friends from Ivies represent a big source of cross-talking in my view. The high flyers who write opinion pieces know too many public servants who really are self-sacrificial, who could have taken the private money route, and who probably are giving their employers a great deal. These people certainly exist, and are far outnumbered by the types I have described. This is the world you inhabit, and selection bias is awfully powerful. Your friends are smart and hard-working (which is why they are your friends). But think about it for a moment; how many teachers can have gone to the great schools you mentioned? Not so many of them, and have their expensive and exacting educations led to their being better valued or better paid than their less able, less well-educated colleagues? No, just time served.
I am not meaning to slag on teachers, but rather on a system of management that is unable (frequently by design) to recognize and reward either ability or effort. Counter-anecdotes don't same much about the population at large.

Among the big public employment categories, I think of teachers as having probably the highest proportion of good intentioned workers. The lowest proportion is probably prison guards.

Navier-Stokes wrote:
Feb 21st 2011 5:08 GMT

"I guess experiences can differ, as the public servants I know went to Harvard, Oberlin, and Cornell, among others. Though now that you mention it, some did get degrees in government, which people in economics didn't think was a real subject."

I don't rub-elbows with the same class of people as MS, but I too know some public servants who attended fancy-pants colleges, and many more who attended run-of-the mill Big Ten universities. But the great majority of public servants I know have no degree at all: middle-aged police, firefighters, road-workers.

I think MS's source misleads by trying to aggregate public and private employees. Looking at specific jobs and qualifications is more instructive. I doubt you'll find any parochial-school teachers doing better than their local public-school counterparts. I also doubt any of non-degreed police-officers I've known would do as well financially outside the police department.

The rise of public-safety degree programs also increases the number of public servants with college degrees, but what does one do in the private sector after graduating from Western Illinois University with a degree in "Law Enforcement and Justice Administration"?

SF-NY wrote:
Feb 21st 2011 5:10 GMT

I recall an article about a year ago in the Economist in which it stated that public school teachers were recruited from the bottom 25% of college graduates, and implied that American schools were full of teachers who weren't competitive enough to compete in the private sector. While some publications often produce conflicting viewpoints, TE usually sticks to its thesis fairly tightly, calling for market reform and liberalization of labor markets. As many other readers have pointed out, it is the ability of tax-payers to continue funding the public-sector paychecks that is the real issue, and the unions would be wise to create a viable alternative. California is a perfect example where the unions have gone haywire, at this point to their own detriment. Because of their excessive pensions, the government now has to fire thousands of teachers just to pay for overly generous pensions for the current baby-boomers. Whether or not this is fair is not nearly as important as whether or not it is sustainable

everafter wrote:
Feb 21st 2011 5:14 GMT

More college educated in the public sector also means we have more government dollars educating them. And when historically has there been a government agency "go out of business"?

1-20 of 141

About Democracy in America

In this blog, our correspondents share their thoughts and opinions on America's kinetic brand of politics and the policy it produces.

Advertisement

Advertisement

Latest blog posts - All times are GMT

Kabuki comes home
From Asia view - 1 hrs 55 mins ago
Link exchange
From Free exchange - March 2nd, 21:42
An abundance of activity
From Multimedia - March 2nd, 21:14
About that Goldman estimate
From Free exchange - March 2nd, 21:10
More from our blogs »
Products & events
Stay informed today and every day

Subscribe to The Economist's free e-mail newsletters and alerts.


Subscribe to The Economist's latest article postings on Twitter


See a selection of The Economist's articles, events, topical videos and debates on Facebook.

Advertisement