In the controversy over public sector unions and worker pay, the political left argues that government workers are not overpaid. Evidence from California, however, shows that when everything is considered, public sector employees are paid much more than similar private sector workers.
Research by Andrew Biggs of American Enterprise Institute and Jason Richwine of Heritage Foundation was summarized in the Wall Street Journal. Some findings:
- In terms of salary, the California study found that private and public sector workers earned salaries that were almost equal.
- State and local governments often guarantee a certain level of return on workers’ retirement savings. The article cites eight percent in California. (In Kansas, workers who joined KPERS before 1993 are guaranteed eight percent interest on contributions. For those who joined later, the rate is four percent.)
- Job security is a benefit. A private sector worker has a 20 percent chance of losing a job during a year. For state and local government workers, the rate is only six percent. The authors estimate this to be worth about a 15 percent boost in compensation, especially since public sector workers have been found to be more risk-averse than other workers and value job security highly.
Adding it all together, the authors estimate that California government workers are paid 30 percent more than comparable workers workers in large private firms, a value thought to be similar to other states with powerful public worker unions.
The full working paper by Biggs and Richwine is available at Are California Public Employees Overpaid?.
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