US public sector workers are paid less than their private counterparts

Whenever I hear some empirical proposition used by a politician my curiosity is immediately aroused and I go searching for evidence to support or refute the statement. That is the nature of my professional life as a researcher. I often find that politicians twist the facts to suit and when put in context the argument becomes more nuanced to say the least. I also often find out that the politician has just made things up which in other words is referred to as lying. The fiscal austerity push in the US and elsewhere is being justified by a number of erroneous propositions but one of the worst claims is that public workers are so well paid that they are bankrupting governments all over the world. That is a claim that needs investigating and fortunately some credible researchers in the US have done the hard yards and come up with some definitive results. They all show the claims by the austerity proponents to be lies, to say the least. Progressives should focus on these lies and construct simple messages to drown the public in – like – US public sector workers are paid less than their private counterparts! Then we can progress and discuss what deficits mean etc.

There was an Associated Press release today (March 1, 2011) – Wis. gov. to outline ultimate intentions in budget – which said that Wisconsin Governor Scott Walker’s proposal to take most “collective bargaining rights away from most public workers”

… represents just one piece of his vision for the state’s future. Now he’s ready to reveal the rest.

As background, please read my recent blog – The conservative agenda is becoming more transparent – for more discussion on this point.

The AAP reports that the state plans “major cuts to schools and local governments” (about 9 per cent state-wide). So as Paul Krugman also noted yesterday – Leaving Children Behind – that the deficit terrorists are not only diminishing the present but they are also undermining the future.

As Krugman notes, over the long-term the burden of fiscal cuts proposed by conservatives “always seems to fall disproportionately on those very children they claim to hold so dear.”

His example is Texas which he says should adopt the slogan “Lose the future”, but the argument applies to every government that pursues a neo-liberal agenda.

This is a constant theme in my blog – by sustaining high teenage unemployment and allowing children to grow up in homes where their parent(s) are unemployed – the neo-liberal policy approach is locking-in a dumbed down future of mediocre productivity and unhappiness.

This is compounded by cuts to education to “save money” when every bit of evidence shows that education helps militate against joblessness and also provides the basis for future technological improvements.

With ageing societies, the best thing governments can do is ensure there is full employment and handsomely fund public education and the supporting infrastructure – transport, child care etc.

But all the likes of Scott Walker can think about is a number on some set of accounts “the budget shortfall”.

How does a school system cope with a 9 per cent cut? The AAP report that it will mean “teachers are laid off, class sizes are larger, course offerings are reduced, extracurricular activities are cut, and whole parts of what we value in our schools are gone”.

So the agenda is wider than just cutting pay for public servants. The same thing is happening in the UK at present, although the atrocities are being pursued by the national government which has no financial constraint at all. What we are witnessing now – in the aftermath of the worst crisis in 80 years that was caused by governments giving the private sector too much latitude – is a fundamentalist attack on the public nature of our lives.

You can bet that the corporate welfare subsidies will remain intact and the concessions to the rich will go unscathed (witness conservative support for the extension of the Bush tax cuts for the high income earners). But there is a concerted effort now – under the smokescreen of fiscal crises – to reduce the public nature of our lives.

Given many people rely on the support of the public sector – including all the children that receive their education from state schools – this move will increase inequality and further undermine future wider participation in growth and prosperity.

Of-course, when the next crisis comes along those who have most to gain from the privatisation of our public spheres will have their hands out the first for public support.

As you will recall a key claim of many governments (both national in the US and elsewhere and the US states) is that they are encountering a fiscal crisis because their bureaucracies are stacked with high paid and lazy public servants that have been nurtured by aggressive unions who succeed in gaining benefits for their members which are out of all proportion with the private sector – in both relative and absolute terms.

This argument has been rehearsed widely in the press – clearly being a dominating recent theme in the rabid right-wing press but it has also gained traction in the mainstream media such as the New York Times.

In this paper (published September 2010) – Debunking the Myth of the Overcompensated Public Employee – The Evidence – by Jeffrey Keefe we see a sample of “public official condemnation” of public employees by senior US politicians. I have documented them as follows with more detail than Keefe provides.

First, we have the extraordinary statement on NBC’s Meet the Press (December 13, 2009) from former Governor Mitt Romney of Massachusetts:
government workers”

… the real threat right here is something that Alan Greenspan just said, and that is that if we don’t take action to rein in the scale of government and the growth of government spending and the compensation levels of government workers–you saw government workers, average government workers, are now making $30,000 a year more than the average private sector worker … These kinds of excesses and the massive deficits that, that, that government is putting in place, over a trillion dollars a year for these coming several years, this threatens our long-term viability, because it, it, it suggests that we could have runaway inflation.

Governor Chris Christie addressed the Annual Luncheon Meeting of the New Jersey Conference of Mayors on April 29, 2010 and said:

And I think that people in New Jersey now feel as if there have become two classes of people in New Jersey. Public employees who receive rich benefits, and those who pay for them. Now that is an uncomfortable reality to come to in this room, but it is the reality … You are setting up two different classes of people, because for those of you who work in the private sector you know pay freezes have become the norm. Pay cuts, failure to match in 401K programs, more contributions towards your health benefits, have become the norm to keep businesses afloat …

I note that in the transcript his statement (which ended with a challenge to the teachers’ union to pursue legal action to preserve their benefits to “go ahead, go ahead”) was followed by “Laughter, applause”.

Governor Tim Pawlenty of Minnesota was at it in this article (April 30, 2010) -
Gov. Pawlenty: Public employees are ‘over-benefited and overpaid’ – saying:

It used to be that public employees were underpaid and over-benefited. Now they are over-benefited and overpaid compared to their private-sector counterparts.

In an article (June 7, 2010) – Gov. Daniels Bashes Public Employees As ‘A New Privileged Class’ – Daniels of Indiana said:

We have a new privileged class in America … We used to think of government workers as underpaid public servants. Now they are better paid than the people who pay their salaries … Who serves whom here? Is the public sector — as some of us have always thought — there to serve the rest of society? Or is it the other way around?

Finally, in the article (June, 24, 2010) – Bouchard says public employees overpaid, calls for Constitutional amendment to limit pay we read that the then Republican gubernatorial candidate Mike Bouchard claiming that:

Almost every study says (government compensation levels) are between 17 and 24% higher. So we have to reflect the people we work for.

More recently, in a speech to the Milwaukee Press Club (December 7, 2010), Wisconsin Governor-elect Scott Walker claimed that:

There needs to be a reality check for everybody across the State of Wisconsin that you don’t cut hundreds of millions of dollars out of the state budget … Unless we have alternatives like we’re talking about like wage and benefit reforms … We can no longer live in a society where the public employees are the haves, and the taxpayers who foot the bills are the have-nots … The way to get things under control is to get wages and benefits under control for state employees.

So a reasonable hypothesis would be that public employees (sheltered from the cold winds of the private market by their powerful unions) are being paid more for equivalent work than their private counterparts.

For a researcher like me when you have a conjecture to examine you look for credible research or do it yourself. The media and the politicians can say what they like but there is a research community out there generating information that should force policy to be evidence-based.

If politicians blithely proceed to repeat statements that are contrary to the evidence then the public has a better chance of understanding the underlying motivation of the politicians intentions and actions. I cannot find one statement by a deficit terrorist that is supported by the evidence.

Anyway, what about the overpaid public worker in the US? What is the evidence about that?

Answer: No credible evidence. Conversely, there is plenty of evidence in the credible research literature that shows exactly the opposite – that public sector workers are less paid once you control for other influential characteristics.

For example, this study by the US Center for State and Local Government Excellence and the National Institute on Retirement Security – Out of Balance? Comparing Public and Private Sector Compensation Over 20 Years – which showed that:

The picture is clear. In an apples-to-apples comparison, state and local government employees receive less compensation than their private sector counterparts … These public sector employees earn less than they would earn if they took their skills to the private sector.

The apples-to-apples refers to the fact that you have to control for characteristics other than sector when assessing pay differentials.

There are a lot of errors in logic based on composition. It is often said that divorce rates are higher in Canberra (our National capital). The raw statistic is correct although distorted by the fact that a “high proportion of applicants from south-eastern New South Wales and Victoria … apply for divorce through Australian Capital Territory courts” (Source).

But there is also a major compositional problem. Canberra, home of the public service, has on average much higher proportions of higher educated and higher paid workers, two characteristics that are associated with higher divorce rates. So when you make comparisons controlling for these characteristics the regional disadvantage (or advantaged depending on how you look at it) all but disappears.

The key findings of the study were:

  • “Jobs in the public sector typically require more education than private sector positions”.
  • “Wages and salaries of state and local employees are lower than those for private sector employees with comparable earnings determinants, such as education and work experience. State workers typically earn 11 percent less and local workers 12 percent less”.
  • “During the last 15 years, the pay gap has grown: earnings for state and local workers have generally declined relative to comparable private sector employees”.
  • “Benefits make up a slightly larger share of compensation for the state and local sector. But even after accounting for the value of retirement, healthcare, and other benefits, state and local employees earn less than private sector counterparts”.

There are many other well-designed and implemented research studies of this question which come to the same conclusion. In terms of the current ravings by these conservatives what that means is that they are lying and are probably also ignorant of the research literature.

What comes out of the Cato Institute is not research it is propaganda.

In Jeffrey Keefe’s paper – Debunking the Myth of the Overcompensated Public Employee – The Evidence – (published September 2010) you are provided with another piece of evidence that demonstrates the mendacity of the conservatives.

The paper explicitly:

… investigates whether state and local public employees are overpaid at the expense of taxpayers.

As long as we are speaking of state and local governments then spending is, in part, underwritten by revenue gained from taxes. That never applies to a national governments where Taxpayers do not fund anything. You might also like to read this blog – When governments are financially constrained – for more discussion of the difference between a state and national government in terms of fiscal constraints.

Anyway, Keefe writes that as a result of targetting excessive public sector pay and conditions as a key fiscal problem governments propose remedies which:

… include public employee pay freezes, benefits reductions, privatization, major revisions to the rules of collective bargaining, and constitutional amendments to limit pay increases, each as a necessary antidote to the supposed public employee overpayment malady.

The following table is taken from Table 2 of Keefe’s study and provides a public-private pay comparison by education.

Relevant to the information presented in his Table 2, Keefe says that:

1. “The public sector employs more highly educated workers.”

2. “As a result of the relatively high level of unionization, the public sector has established a floor on earnings, allowing those with a high school education to be better compensated than their private-sector counterparts … On the other hand, college educated private-sector employees earn considerably more than similarly educated public sector employees”.

3. “Public sector employees receive more of their compensation in the form of benefits than private-sector workers”.

Keefe’s overall summary conclusion is:

… that public employees, both state and local government, are not overpaid. Comparisons controlling for education, experience, hours of work, organizational size, gender, race, ethnicity and disability, reveal no significant overpayment but a slight undercompensation of public employees when compared to private employee compensation costs on a per hour basis. On average, full-time state and local employees are undercompensated by 3.7%, in comparison to otherwise similar private-sector workers. The public employee compensation penalty is smaller for local government employees (1.8%) than state government workers (7.6%).

You will find a host of links on this page which also bear on the question of lying about public sector wages and conditions.

Once you understand what the evidence is indicating then you are better able to see through the neo-liberal agenda.

If you have friends who are sympathetic to the type of claims that come out of Scott Walker’s mouth ask them if they know what the research literature rather than the ranters indicates.

Ask them to debunk Keefe’s work or the myriad of other credible studies that have been done in the interests of knowledge generation. Ask them to provide alternative research. They will quickly deflect the conversation and start raving about children being burdened by debt or some other erroneous claim.

My experience is that you cannot nail these characters down. I have spent my whole professional life looking at the way systems operate and then examining evidence to see if my understandings are consistent with the data. Yes, I have priors and prejudices. But I would have no credibility if I rejected evidence because it was uncomfortable for my latest pet theory or bias.

As a digression, we now have better information about why Wisconsin Governor is trying to limit collective bargaining. The workers are apparently enjoying themselves too much.

Scott Walker recently put out a media release –
Collective Bargaining is a Fiscal Issue
– which reports among other things that unions have been bullying state employers (Education Department) to include erectile dysfunction drugs in the health insurance policy. His office references this News Report as an authority.

Unless the V was supporting serious paedophile activity, I would have thought that the Education Department would have wanted happy teachers.

I thought one needed brains to brainstorm

I thought the title of this CNN video was overstatement exemplified. I do not recommend watching it – the characters that appear are enough to tell you that – public deficits are dangerous and have to be cut and then we will enjoy more freedom – was the message.

But I did wonder – don’t you need brains to brainstorm?

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Hope to see many of you in Newcastle this year.

Conclusion

Remember to ask the conservatives in your life to comment on the evidence. Not to summarily dismiss it – but to consider the methods, techniques, data and then tell you that it “ain’t so”.

My prediction is that they will quickly divert the argument into another of their pet biases – that is the nature of religion – when the going gets tough it comes down to faith. Evidence cannot really shake faith.

But what evidence can do is undermine political support and get these creeps out of office and into places where they can do less harm.

That is enough for today!

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25 Responses to US public sector workers are paid less than their private counterparts

  1. Benedict@Large says:

    Thanks for chiming in on this. You have now uttered the word “Wisconsin” four times as otfen as President Obama.

  2. Alex says:

    I don’t know a lot about the Wisconsin case, but I think there are a couple of important points to note from my knowledge and experience.

    - highly skilled public doctors earn much less than private sector counterparts (my Uncle is a doctor, and works a mix of the two). This agrees with your table.
    - I think people make generalizations about entire public sector pay when they see the compensation of government department CEO’s, which are typically excessive (IMO).
    - people hate inefficient bureaucracy, and the government probably has a bit of it. That hate might be taken out on the workers

  3. Gumby says:

    Something to bear in mind when people chime in about the inefficiency of government projects are the figures on failed private businesses. Last time I heard, the failure rate of private firms was pretty high and yet consumers rely on failed businesses to access real goods in the market place. I don’t think the claims of relative government inefficiency can be substantiated in light of these facts, especially when one considers the plight of their employees. Simply put, the government has the purchasing power and expertise to allocate resources more efficiently and although there is plenty evidence of favouritism and graft in this sector (as there is in the private sector), I think this is more a failure of democratic engagement than any intrinsic flaw in its model of resource allocation.

  4. Andrew says:

    People simplistically believe the Government is taking a share of private sector wealth through taxation and are spending it wastefully. From their perspective the private sector has created ALL the wealth and the Government is denying them them the opportunity to spend it all as they see fit. As they see it they are paying public sector wages.

    I can understand the ignorance of a lay person. I wish it wasn’t so, but this misconception will persist. it’s very hard to counter this kind of belief. It’s so hard to explain the true operation of the monetary system to the sharpest and most open minds. The real evil comes from those who understand the system and lie to achieve an ulterior objective.

  5. Steven Shaw says:

    As a progressive economist, are you concerned about being affected by confirmation bias? If so, how you do you mitigate the problem?

  6. Jose says:

    Why care about studies? If public workers were really better paid than private sector workers, it seems to me that the solution would be to raise private pay scales, not reduce public workers’ wages and salaries. Only a society that has lost all sense of ambition and self-confidence can defend a “solution” that would worsen the living conditions of a substantial number of people without improving the lot of the others.

    This reminds me of all the ballyhoo about the fact that hedge fund managers pay only the low rate tax on capital gains while their home servants pay the higher tax rate on income. The liberals´proposed solution to this was to raise the rate on the HF managers. Of course, this would do nothing to improve the situation of the servants. The extra tax money would probably end up being spent on defense, or Afghanistan or some other liberal (or conservative, let’s be fair!) ) pet project. Instead, cutting the rate on servants’ pay – or abolishing it altogether – would really make a difference for them: more cash by the end of each month.

    With this kind of warped logic prevailing in the American public discourse it’s no wonder that the credibility of political institutions and its’ leaders has reached such a low point among the public.

  7. pebird says:

    Well the U.S. Congress couldn’t limit financial executive compensation, so we have to find someone less powerful to bear the brunt of our frustrations. Teachers sound good to me.

    If it wasnt really happening it would be funny, no one in their rigHt ming would believe we could be so self destructive.

  8. Mark McNamara says:

    In a world where the well worn constraints of risk and return are accepted as part of the capitalist system – public sector workers should ALWAYS earn less than their private sector equivalents.

    If the return I get for the provision of my labour is subject to the whims and flows of the market and economic cycle then the risk I assume whilst working in the private sector is higher than the public employee equivalent, compensation should always reflect these risk differentials. Its nothing to do with academic profiles etc its to do with economic risk.

    The whole basis for an entrepreneurial economy lives and dies on the understanding of risks and returns. Those who choose to take an economically safer route with their labour (and I stress economically safer route – not physical) should always be willing to accept lower compensation resulting otherwise the entrepreneurial thesis fails as public service does not operate within an equivalent economic risk profile.

    The empirical evidence from the crisis over the past number of years clearly indicates that those who entered the crisis under permanent working contracts within the Public sector have not experienced anything approaching the job losses that their private sector equivalents have suffered. In fact they have been largely insulated from the economic cycle. Arguments to the contrary have, and always will fail this acid test in times of economic stress.

    It’s risks as well as returns which need to be considered – most commentary including those noted always forget this fundamental issue. The basic risk is that your employer goes broke and the employees follow suit – if the deficits are not challenged the same will happen Uncle Sam Inc. Ask the Irish.

    qed.

  9. sidchem says:

    Bill

    Thanks for the information

    I think the problem is that all bureaucratic structures are wasteful including government and private by their very nature. We can’t take it out on the private ones very well so the aim of the frustration is often taken out on the public one instead. My experience is that the private ones are the worst since at least the public ones know they have the stereotype of being the most wasteful and they try to compensate for it.

  10. Burk says:

    I would suggest that there are a couple of flaws in the Keefe study.

    1. He does not analyze retirement age. If one benefits from a defined benefit retirement program which allows one to retire at age 50(!) and collect a pension for the rest of one’s life, that is a huge discrepancy vs the private sector (CEO’s excepted, as usual!). Retirement ages of 50 are not uncommon, age 55 is very common, and 65 is quite rare. It is very common for retired public servants (military people come especially to mind) to collect their pensions as they enter second careers, often in other public agencies (double-dipping), or with private military contractors, etc.

    2. He does not analyze the overall retirement obligation incurred by current contracts. He says that they are “unfunded” and leaves it at that. Well, what is going to happen? The money has to come from somewhere. While we all hope that the pension funds are successful in their stock market adventures, (aren’t we all!), and get back to solvency, but that may not happen, and those costs do not enter Keefe’s analysis.

  11. Sam Perry says:

    I thought you missed the best article written yesterday. The op-ed by Charles Koch titled “Why Koch Industries Is Speaking Out” in the WSJ was hilarious he actually claims he is just a misunderstood humanitarian looking out for the best interests of poor people.

    “Our elected officials would do well to remember that the most prosperous countries are those that allow consumers—not governments—to direct the use of resources. Allowing the government to pick winners and losers hurts almost everyone, especially our poorest citizens. Recent studies show that the poorest 10% of the population living in countries with the greatest economic freedom have 10 times the per capita income of the poorest citizens in countries with the least economic freedom.”

  12. Sergei says:

    “public sector workers should ALWAYS earn less than their private sector equivalents”

    Excellent argument!

    But it looks to me like it assumes that private sector equivalents ALWAYS produce more value to deserve their higher paychecks. It also looks to me like the only acceptable measure of value is monetary measure. And it also looks to me, in particular in the light of current discussions about financial executives none of which went to jail, that most of private sector equivalents who suffered from the “risks” had nothing to do with “returns”. And so on.

    Well, too much ideology and too little common sense.

  13. Mark McNamara says:

    @ Sergei

    As I suggested on a like for like risk return basis those taking on more risk with the provision of their labour, all other things being equal, should ordinarily expect to earn a higher compensation.

    The vagaries associated with what goes on within individual institutions and sectors over time will appear in poorer returns for their investors and related stakeholders which in the case of the average bank employee is being felt in huge job losses.

    I, nor you, can make any argument in terms of ‘what’s a person worth’ because it’s generally performance based. What I’m simply suggesting is that those workers who take on more economic risk in their normal day to day jobs should ALWAYS earn a higher return versus those who work in a lesser economic risk environment. This is the basis for any investment including ones labour. And you are correct it is solely a monetary view of the world and does not take into account other risks aside from economic – however I was explicit in this regard.

  14. Sergei says:

    Mark, surely if you make employment the biggest risk in your society then people will have many reasons to argue that taking this risk should be properly rewarded. But your reasoning is backwards. It is the same as with housing. On one hand you want house prices to go up (wealth effect, collateral to banks, consumer society etc) but on the other hand you want to export more and in order to export more you want labour costs to go down while you make housing the single biggest cost of labour.

    Instead of arguing about consequencies it makes sense to have a look at reasons. Right quesitons have a much higher chance to lead to right answers :)

  15. Will Richardson says:

    MM. That’s fine then as like for like public employees earn less than private sector ones.

    B. Sovereign Floating Currency Modern Money Governments, unlike those in the Euro monetary straitjacket, can create/spend as much money as needed to generate national demand equivalent to national supply capacity including mopping up mass un/der-employment, so it’s not a problem, again.

  16. Tom Hickey says:

    “public sector workers should ALWAYS earn less than their private sector equivalents”

    If you want to incentivize poor government.

  17. Alan Dunn says:

    Tom,

    Politicians are very well paid in Australia and they are without exception complete clowns,

    I don’t think there is anything to be gained by increasing the wages of government workers either.

    Graduates in the public service here start on close to $50k per annum – That’s pretty good dollars dor a 21yr old.

    And yet the majority of these people endorse the lies of neo-liberalism.

    Hence, increasing wages provides no incentive whatsoever that would be of any benefit to society.

    All it would do is increase the incomes of the Neo-liberal scum that are destroying anyone and anything that doesn’t conform with their sick and twisted ideology.

  18. Andrew says:

    It’s an interesting argument Mark proposes. Some truth in it, but its not the full story.

    There are many low risk jobs in the private sector that pay exceedingly well. The obvious being positions in too big to fail banks, defence contractors, utility monopolies, Microsoft, retail monopolies etc etc.

    Public sector workers are subject to performance review just same as private sector workers. There’s always a risk of falling short of some arbitrary management mark for both sets of workers.

    Government policy changes in reaction to societal and environment changes, there’s a risk a public employees skills will become redundant.

    Private sector management love to have the workforce in constant fear of retrenchment to motivate them and control them. The risks may be less apparent to public sector workers. Are anxiety levels lower in the private sector? I don’t think so, because fear of the bosses is by far biggest anxiety. Bosses are pretty much the same everywhere.

    I detect a tinge of jealousy from the private sector. I’ve played on both sides, it’s the same shit to me.

  19. Tom Hickey says:

    Alan, I don’t think that is an argument for driving wages to the bottom. If wages are not an incentive, then we really need to rethink the whole of economics, not just neoliberalism.

    BTW, I am not against rething economics from the bottom up. I am one of the people who think that equating incentive with money is bonkers. It is the sign of a very sick society — probably terminal.

    But as long as we retain the system we have, money is presumed to be the chief incentive, and lower paid people are expected to underperform — an expectation to which they generally descend.

  20. Mark McNamara says:

    @Sergei

    Actually I would much rather house prices tracked rental inflation or deflation – I’m completely against crazy house price speculation which allows moves away from long run rental yields – it has us exactly where we are today. Speculation or should I say banks speculation on ones homestead is never clever. I fully agree with you, property speculation has been the root cause of a significant proportion in the loss of competitiveness in many economies. But you’re missing my basic point.

    I never said I’d make employment the biggest risk in society – correct me, but you did. I said on a like for like risk basis – in a purely monetary sense in any capitalist society those who take on higher risk with any investment choice including their labour should, all other things being equal, be compensated with a higher return. This is the very basics of any investment choice.

    Others can argue that money is a crass method of compensation for labour productivity but, please forgive me, if I’m wrong; it’s the only dish on the menu for the vast majority of employees, public or private. If there are other compensation methods known to man, that work, then I’m all ears.

    This is not a case of asking the wrong questions it is simply stating current economic realties, as they present themselves neoliberal or left leaning choices aside.

    To make an argument about reasons and consequences of employment and career choice normally involves many considerations – mostly boiling down to skill sets and work availability. These are probably outside the narrow scope of my argument which is simply stating a basic investment choice relating to ones labour in a risk return environment. Risk as measured by the economic cycle and its effects on private institutions versus public and returns in the form of cash.

    @Andrew

    I agree with you, the industries mentioned are in the main more insulated than most to the cycle and as result compensation for employees should be a reflection of this. In simple terms many working in these businesses are probably overpaid whose costs are being borne by the end consumer. Barriers (including skill sets) to these markets/industries are relatively high and margins associated with these industries are normally higher as a result which allows for quasi profiteering in these industries.

    There is nothing in your argument which suggests what I’m saying still isn’t logical given the risks associated with the cycle and compensation for employees more subject to it.

    I disagree with you in relation to Public employees and review – I too know Public organisations where review is largely paid lip service to. I don’t dispute that over time public sector employees skill sets may become redundant but should ones compensation be based on such an unknown probability? We know the probability of economic cycles coming and going as they do is very high and we also know that in a world where capital has the upper hand it’s normally labour where the focus of the ‘restructuring’ knife tends to fall.

    I know that the specter of bully boy management tactics looms large in both public and private work environs but I disagree with you when you suggest in relation to anxiety ‘..fear of the bosses is by far biggest anxiety.’ . In most organisations Labour Law prevents, or at least is supposed to prevent such work conditions as representing the norm.

  21. Grigory Graborenko says:

    @Mark:

    “I never said I’d make employment the biggest risk in society – correct me, but you did. I said on a like for like risk basis – in a purely monetary sense in any capitalist society those who take on higher risk with any investment choice including their labour should, all other things being equal, be compensated with a higher return. This is the very basics of any investment choice.”

    What risks are there, for the vast majority of people in the private sector, other than being fired?

  22. stone says:

    Andrew “It’s so hard to explain the true operation of the monetary system to the sharpest and most open minds. The real evil comes from those who understand the system and lie to achieve an ulterior objective.”

    I think it is worth taking a long hard look at whether our conceptually hard to grasp monetary system is actually necessary. Bill is a fan because he considers that it allows opportunities to ensure full employment without needing to grasp the politically thorny issue of transparent redistribution from the wealthy by taxation. Art Laffer is a fan because he recognizes that it has allowed massive redistribution to the most wealthy. I wonder whether all it does is provide opaqueness that provides a cover for whatever motivations those in power have whether good or bad. My feeling is that opaqueness is very much a cost and a cost that requires rigorous justification. All money can ever be is a way of allocating power.

  23. Bill,

    Very good piece, thanks.

    Just to be prepared:

    The anti govt crowd says, yes, the US govt pays up for ‘credentials’ it doesn’t need and don’t get used.
    It pays more for a highly educated person in a job that can be done by a less educated person.
    So in that sense the govt is paying more for the same task performed than it needs to and more than the private sector would.

    My far less comprehensive and less elegant discussion on this that doesn’t do it justice can be found at http://www.moslereconomics.com

    Best!
    Warren

  24. Rui says:

    Interesting points that you bring up; however, for someone who has worked in the public and private sector, I can honestly say that there are many instances in which the education level can also be a misleading variable to justify whether workers are under paid. For example, in order for someone to be employed as a social worker in the child welfare system, it is required that they possess a bachelor’s degree, while someone with a similar skills set is excluded from that labor market if he/she only held an associate’s degree. Another such an example is the teaching profession where many of my colleagues are required to obtain a master’s degree within a certain number of years to avoid dismissal – but how exactly it changes the job function puzzles me.

    Furthermore, to me an important missing piece in the analysis is the fact that there are many job functions in the government sector that do not necessarily translate to the private sector: law enforcement and firefighting come to mind. Therefore, my belief is that there may be too many disqualifying factors that make such general comparisons to be valid or at least free of conservative or liberal bias. I would prefer to see studies that perform comparable industry comparisons in order to eliminate some of the noise that will naturally come from Keefe’s type of research.

  25. LPC says:

    I have a problem with those who may equate federal education spending with the size of federal government, or presume cutting Federal education funding = hurting children’s education. What a pile of horse squeeze. I have no issue paying taxes to ensure my children have a good education. I do have a problem with organized groups, such as the teachers unions, Federalizing education.
    Let the states and the parents who live in them have the freedom.

    Second, most people I know who advocate serious reduction in federal spending do so based on honest belief in what is the proper role of Government. We can make the argument as partisan as you like, but in the end, a large segment of the U.S. believes we have strayed too far from Constitutional government. If you disagree, that is your right, but you only fool yourself if you characterize the opposition as ignorant or evil.

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