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Thursday, October 14, 2010

"Are Public Sector Workers and David Brooks Overpaid?"

Dean Baker: responds to David Brooks' complaint that public sector employees are overpaid, in part because of unions:

[David] Brooks ... complains that AFSCME, the public employee's union, was the largest single contributor to political campaigns between 1989 and 2004. While this may be true in the sense that AFSCME gave more money than Robert Rubin or Rupert Murdoch, AFSCME represents more than a million workers. Certainly the million richest Wall Streeters, oil tycoons, or tech entrepreneurs gave far more money to candidates than AFSCME.

He also points to this:

The Wage Penalty for State and Local Government Employees, by John Schmitt, CEPR: State and local government budgets are under severe strain. Rather than blame the recession, which has simultaneously slashed tax revenues and increased the demand for social services, some conservatives have argued that excessive pay for public employees is the real cause of the financial woes. Several recent reports in the media have reinforced this view by emphasizing that, on average, government employees earn more than workers in the private sector. The problem with these analyses is that state and local government workers have much higher levels of formal education and are older (and therefore generally more experienced) than workers in the private sector. When state and local government employees are compared to private-sector workers with similar characteristics, state and local workers actually earn 4 percent less, on average, than their private-sector counterparts. This paper examines the wage penalty for working in the state-and-local sector.

He adds:

It is likely the case that many state and local governments did not adequately budget for workers' pensions, but this is more an issue of failed accounting ... than excessive pensions. Brooks highlights an estimate that the amount of the average unfunded pension for all public sector workers is $87,000.

This does not seem particularly large. If we assume an average retirement of 20 years, this comes to $4,350 per worker pension year. Since many public sector workers do not have Social Security this hardly seems an excessive amount on the workers' part.

    Posted by on Thursday, October 14, 2010 at 01:25 AM in Economics, Politics | Permalink  Comments (27)


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