ECONOMY - Public vs. Private Workers

"Protests in Wisconsin, Elsewhere Stir Debate on Public vs. Private Pay, Benefits"
PBS Newshour 3/1/2011

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Excerpts from transcript

JEFFREY BROWN (Newshour): In fact, two new national polls offered some comfort to embattled unions. A New York Times-CBS News poll found that 60 percent of Americans oppose efforts to weaken the collective bargaining rights of public employee unions. Thirty-three percent support the effort.

And a Pew Research poll released yesterday found 42 percent of adults surveyed nationwide sided with the unions, while 31 percent sided with Gov. Walker in their dispute.

A key issue in the national debate: Do public-sector workers do better than those in the private sector, or to put it more bluntly, are state and municipal employees overpaid? Numerous studies have been done, but researchers draw different conclusions, partly due to factors that make direct apples-to-apples comparisons difficult.

Those include differences in salaries based on education level and wide variations in compensation packages among states and municipalities, and how to weigh the benefit of a traditional pension versus the riskier 401(k) or less tangible benefits, such as increased job stability?

In the meantime, the debate over unions continues to spread beyond Wisconsin. In Ohio today, thousands of protesters converged on the state capitol, where legislators are considering taking up a bill this week that would end collective bargaining rights for all public workers and eliminate their right to strike.

And we take up the contentious question of public- versus private-sector pay with Harley Shaiken of the University of California, Berkeley, where he specializes in labor issues, and Chris Edwards, who works on tax and budget issues at the Cato Institute, which is dedicated to free markets and limited government.
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CHRIS EDWARDS, Cato Institute: I think, for state and local workers, their wages on average across the country are pretty well in line with the private sector. Teachers and police and fire, the academic studies I have seen, the wages are pretty reasonable and competitive.

It's the benefits where the state and local workers have a huge advantage. And to give you a couple examples, virtually all full-time state and local workers get old-fashioned defined benefit pension plans that are typically very generous. Private-sector workers, very few of them get these defined benefit pension plans anymore.

So these government pension plans are far more lucrative generally than private sector 401(k) plans. Secondly, virtually all full-time state and local workers get retiree health subsidies. So, the typical worker state-local retires at, say, age 55 or 56. Then they get 10 years of health care subsidies before the federal Medicare kicks in.

That's the type of benefits that people in the private sector simply don't get. And finally, as your piece pointed out, public-sector workers get a lot more job stability. They have huge job stability, which has a value. So, a private sector teacher earning $40,000 and a government teacher earning $40,000, they're not exactly comparable, because the government worker has a much more stable job.
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JEFFREY BROWN: Harley Shaiken, I'm sorry to interrupt you, but what does that mean to adjust for education, for example?

Use the education as a way of explaining this. Help people understand.

HARLEY SHAIKEN, University of California, Berkeley: Well, it means that, for example, in the public sector, workers, on average, have -- 54 percent of them have bachelor's degrees or advanced degrees. In the private sector, it's something like 34 percent.

Historically and today in the private sector, those kinds of educational qualifications result in higher pay. So, when you compare public- with private-sector workers, you have got to take into account that so many more public workers -- in Wisconsin, for example, it's double the percentage of the private sector -- have this advanced education. Therefore, they're going to be earning more in a comparable job.

JEFFREY BROWN: All right, let's just stay on the education, the role of education level. Does that sound right to you? What do the studies tell us here?

CHRIS EDWARDS: The -- when you adjust for education and experience and all that sort of stuff, some of the studies show that the state-local workers earn a little bit less in wages. Others show that they're about equal.

So, for example, a "USA Today" study last year on 200 occupations, you know, trash collectors, teachers, et cetera, comparing state and local to private workers, on average, the wages were about the same. It's the benefits where the real difference is.

The bottom line is that public workers are NOT grossly over paid. It is the benefits that are the real problem when it comes to state budgets.

But, in my opinion, that is an issue that can be solved by collective bargaining.

Public workers are my fellow citizens, and I do not demonize them because they bargained for better compensation packages that I do not get in the private sector. I applaud fellow citizens that can bargain for better.

Also, this is not a tax issue. You pay for every worker in the private sector in the price you pay for goods or services, union or non-union. Taxes is just the way government pays for delivering its services. Money which mostly ends up back in American's pockets directly or indirectly.