July 7, 2010

THEY'RE SUPPOSED TO WORK FOR US, NOT WE FOR THEM:

The Government Pay Bonus: Private employees toil 13½ months to earn what federal workers do in 12. (ANDREW G. BIGGS AND JASON RICHWINE, 7/06/10, WSJ)

Conducted for the Bureau of Labor Statistics, the CPS is a long-running survey that couples earnings and employment information with detailed demographic characteristics of the survey population. At first glance, the CPS data show that the average hourly wage for a federal worker is about 48% higher than a private worker's. Yet because federal employees tend to be more educated and experienced than their private counterparts, as Mr. Orszag noted, one has to control for these skill differences. This reduces the public-private salary gap—but it does not eliminate it. The federal wage premium for workers who have the same education and experience stands at 24%, still a windfall for public employees.

Even using all the standard controls—including race and gender, full- or part-time work, firm size, marital status, region, residence in a city or suburb, and more—the federal wage premium does not disappear. It stubbornly hovers around 12%, meaning private employees must work 13½ months to earn what comparable federal workers make in 12.

Most academic studies dating back to the 1970s have found similar pay differences. In addition to the wage premium, federal workers enjoy more generous fringe benefits than do private workers. For instance, federal workers receive a defined benefit pension with benefit levels comparable to those from private 401(k) plans, except that federal workers contribute only 0.8% of pay and are not subject to any market risk. They also receive employer matches to the defined contribution Thrift Savings Plan that significantly exceed the typical private employer match.

If the overall generosity of federal benefits matches that of federal salaries (which seems quite likely), total compensation for federal workers may easily exceed $14,000 per year more than an otherwise similar private employee.

Posted by Orrin Judd at July 7, 2010 6:13 AM
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