Public employees earn less than their private sector counterparts

March 2, 2011 | Economic Opportunity Institute

Part 1 | Part 2 | Part 3

Policy brief: Public employee compensation

Public employee benefits are on the chopping block across the country as state and local governments look for ways to reduce spending. Public revenues remain low due to the lingering effects of the recession and the longer term trend shifting income from the middle class to the wealthy. Washington state, with an unbalanced tax structure that compounds national trends, faces a roughly $5 billion budget shortfall for the 2011-2013 biennium. Cities, counties, and school districts around the state are also grappling with projected deficits.

Wages of public employees are typically lower than those of people working in private companies with similar levels of education and work experience. Nonetheless, critics frequently point to better benefits in the public sector, and advocate cutting public employee pension, health, and other benefits.

However, even with better benefits calculated into the equation, a number of analyses have found that public employees receive less total compensation than their private sector peers.

  • Nationally, state and local governments spent $26.25 per hour per employee in 2010, with 34% of total compensation represented by benefits. Private industry employers spent $27.88 per hour, with 29.4% for benefits.
  • A study of national data controlling for education, work experience, annual hours worked, organizational size and other factors found that total compensation was 1.8% less for local government employees and 7.6% less for state government employees than for comparable private sector workers.
  • A separate study found that state government employees across the country earned 6.8% less in total compensation than comparable private sector peers between 2000 and 2008, and local government employees earned 7.4% less.
  • According to an analysis by the Seattle Times, median wages for the same type of work was lower for Washington state government workers than in the private sector in the majority of nearly 200 occupational categories examined. State government workers tended to earn higher wages in lower paying jobs.

Read more and citations | Fact sheet: Public employee compensation »

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Posted in State Economy

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