2009 Public Sector vs. Private Sector Compensation

Chris Edwards
Tax & Budget Bulletin, No. 59
The Cato Institute
January 2010

"Table 1 shows average compensation per hour worked in state and local governments and the U.S. private sector. Public sector pay averaged $39.66 per hour in 2009, which was 45 percent higher than the private sector average. The public sector advantage was 34 percent in wages and 70 percent in benefits.

The table shows that public sector workers have the largest advantages in health insurance, defined benefit pension plans, and paid leave. Those advantages stem both from the more expensive features of public sector benefit packages and from the greater availability of benefits in the public sector...."

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Library Topic: Private vs. Public Pay

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Federal employees whose compensation averages more than $126,000 and the nation’s greatest concentration of lawyers helped Washington edge out San Jose as the wealthiest U.S. metropolitan area, government data show.

According to Steven Greenhut, "[g]overnment employees now receive far higher pay, benefits, and pensions than the vast majority of Americans working in the private sector. Even when they are incompetent or abusive, they can be fired only after a long process and only for the most grievous offenses." Greenhut uses this article to expose the massive governmental...

According to Chris Edwards, the budgetary woes faced by individual state governments are partly caused by the excessive salaries and benefits promised to government employees. Edwards breaks down the payment gap between public and private employees and determines that "public...

In the midst of the current economic downturn, there is one group that seems to be prospering: public employees. While the private sector is struggling to grow and create new jobs, federal government jobs are doing quite well.

This piece analyzes recent data from the Bureau of Labor Statistics which compares compensation costs in the private and public sectors. In almost every industry, the public sector was able to provide higher wages than the private sector. In some...

According to Chris Edwards, salary and benefits data from the past several years show that federal worker compensation rose quite rapidly during George W. Bush’s tenure in the White House. Edwards explains why this happened and also offers...

In this piece, Chris Edwards describes the growth in federal government pay patterns and addresses the question of whether or not federal employees are overpaid. According to Edwards, some studies that suggest federal employees are underpaid fail to take into account the...

"At a time when workers' pay and benefits have stagnated, federal employees' average compensation has grown to more than double what private sector workers earn, a USA TODAY analysis finds.

Federal workers have been awarded bigger average pay and benefit increases than private employees for nine years in a row. The compensation...

Despite the tough economic crisis in the state of Michigan, Leon Drolet reports that government employees are managing quite well financially. Recent proposals to raise the salaries of public workers will in all...

This piece discusses a recent study which suggests that public sector employees...

Arguing that government workers are quickly becoming America's favored class, Steven Greenhut presents a variety of anecdotes and facts in this piece to back up his claim. According to Greenhut "[t]here was a time when government work...

According to a recent report from the Labor Department, “[i]t costs about $12 more per hour to employ a state or local government worker versus a private sector employee.” This piece expands on that report, specifically detailing the...

According to Joe Davidson, President Obama's plan to avoid federal employee pay raises for two years effectively angered some of his most ardent supporters. This piece describes the anger public...

This article reports on recent data which shows that private pay income is rapidly shrinking in the present economic situation. The same data shows that "government-provided benefits" are rapidly growing. This...

This brief blog post reports on public perception of government wages. According to Gilroy, a recent Rasmussen Report poll showed that "[c]ompared to the average government worker, most Americans think they work harder, have less job security and make less...

This article demonstrates that the U.S. is not alone in its debates over public/private sector pay rates, for its contents demonstrate that the U.K. struggles with the same issue....

"The nation’s 16 million state and local government workers form a large, growing, and well-compensated class in society. State and local workers earned $36 per hour in wages and benefits in 2005, on average, compared to $24 per hour for U.S. private-sector workers. ... Another distinction is that 42 percent of state and local workers are represented by unions, compared to just 9 percent in...

This piece provides a variety of charts and commentary on the compensation difference between state/local government employees and private sector employees. Interestingly enough, Mandel notes that the...

Chart or Graph

The table shows that public sector workers have the largest advantages in health insurance, defined benefit pension plans, and paid leave. Those advantages stem both from the more expensive features of public sector benefit packages and from the greater availability of benefits in the public sector.

There are large public sector pay variations between regions in the United States. Table 3 shows that average compensation per hour for government workers varies from $49.02 in the Pacific region to $30.73 in the West South Central region.

These two charts demonstrate where the pay gap between the public and private sector emerges. The first chart shows that public employee benefits continued to rise steadily even after private employee benefits leveled out in 2004.

This week’s chart by Mercatus Center Scholar Veronique de Rugy shows the growing number of federal government employees.

Figure 1 shows average compensation levels in the public and private sectors since 1950. Compensation includes wages and benefits, such as the costs of health care and pensions. The data are in constant 2008 dollars, deflated by the consumer price index.

This chart examines the change in the composition of personal income in the United States since 1929. The most notable trend is the increase in the portion of personal income coming from government transfers. These transfers include Social Security payments, unemployment benefits, food stamps, and personal and business tax credits.

This chart describes the income raises federal employees received from 2000 to 2010. According to this chart, federal employees received their lowest raise in ten years in 2010. Federal employees were slated for a zero percentage raise in 2011.

Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation, according to the Bureau of Economic Analysis. The data are the latest available.

This chart by Mercatus Center Senior Research Fellow Veronique de Rugy illustrates the trends in public and private employment since the start of the recession. Government employment has increased by 590,000 while the private sector has lost nearly 8 million jobs since the start of the Great Recession.

This chart compares percent changes in public and private worker compensation within each of the five largest sectors in the United States during the 12 months ending March 2010.

"Table 2 shows the number of government workers in each state as a share of employment in the state."

The...chart by Mercatus Center Research Fellow Matt Mitchell uses data from the Bureau of Economic Analysis to analyze the evolution of state, local, and private spending since 1950.

Analysis Report White Paper

This piece details a variety of information on the gap between public and private workers in various states. Martin and Atkins describe which states have the highest pay gap between the public and private sectors, and also present data on the job growth rates in each area.

Adam Summers points to a recent study suggesting that public sector employees are paid less than private sector employees and raises a variety of questions. Summers brings up a variety of elements that the study failed to address, including the job security and inflated benefit packages that public sector employees enjoy.

"Salaries and benefits—for identical jobs—are 30 percent to 40 percent higher in the federal government than in the private sector. Claims that this dramatic discrepancy in compensation is warranted because of government workers’ high skills are unjustified, as this study shows."

Contrary to current popular opinion, this report argues that public employees are more likely to be paid less than their counterparts in the private sector.

The wage comparability laws were passed in order to rectify these apparent discrepancies. Smith's evaluation of the pertinent data on this matter suggests that federal workers already had an advantage over the private sector when these laws were passed, and hence, the laws were "conceived and implemented in error."

According to Chris Edwards, the great presence of unions in the public sector has a large hand in the compensation gap between public and private job markets.

This report specifically examines the private/public compensation levels in the state of Alabama. Alabama taxpayers are forced to pay their public servants much higher wages than those received by the private sector workforce.

"The ten principles in this booklet...provide the reader with an authoritative guide to the following fiscal policy issues facing policymakers in every state."

This piece analyzes the compensation differences in Maine's public and private sectors. Although the actual wage levels are about the same in both areas, the public sector greatly surpasses the private when benefit packages are added into the big picture.

The authors come to the conclusion that "[i]n France, Great-Britain and Italy low skilled public sector workers are paid higher wages with respect to their private sector counterparts, whilst the reverse is true for high skilled workers."

This piece begins by presenting a variety of different studies which demonstrate the pay gap between the public and private sectors. Miller then proceeds to present his own research which generally asserts that the private sector pays better wages than the public sector.

Although Belman’s and Heywood’s findings demonstrate that public employees often do make at least a little more than employees in the private sector, the authors believe that these percentages are negligible and should not be over emphasized.

Venti's research leads him to believe that workers are more likely to accept a job in the public sector and suggests that this is a direct result of the more appealing fringe benefits entailed in public sector employment.

Video/Podcast/Media

According to Nick Gillespie, the three reasons why public sector employees are killing the economy are: "1. They Cost Too Much, 2. We Can't Fire Them, and 3. They're A Permanent Lobby." Gillespie elaborates on each of these reasons and concludes by urging the government to cut the salaries of its employees in order to help the country...

This clip declares that "federal workers are being compensated more than twice as well as private workers." This compensation includes extra benefits such as health care and pensions. Despite the budget crisis, the federal government is hardly cutting any of the workers in the public sector. In the concluding seconds of this video, Dobbs...

According to Larry Kudlow, "government workers make 45% more in total compensation than private workers do, even though the government has better job security." Kudlow discusses these statistics with Daniel Mitchell, briefly touching on the huge growth of...

This video gives a fabulous overview of the data concerning compensation in the public and private sectors. Mitchell gives a variety of information on how quickly the federal government is growing, and along with that, describes the excessive amounts of pay that federal government employees are receiving. The video concludes by suggesting that the root of the pay...

Primary Document

This piece from the Bureau of Labor Statistics provides a variety of charts which detail how much it costs an employer to compensate an employee. According to this piece, "[p]rivate industry employers spent an average of $27.42 per hour worked for total employee compensation...

"This paper... continues the Congressional Budget Office's (CBO's) series of assessments of how the federal government's compensation practices compare with practices in the private sector." The findings in this report were prepared by comparing specific jobs in the...

In his testimony before several U.S. House of Representatives committees, Wendell Cox argues that federal employees are the beneficiaries of greater compensation packages than private sector employees. Cox unpacks the numbers in this debate, suggesting that government monopoly...

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