June 29th, 2022


The myth of the underpaid government employee

Jeff Jacoby

By Jeff Jacoby

Published Dec. 22, 2021

The myth of the underpaid government employee
The Bureau of Labor Statistics reports regularly on what Americans earn. Its latest release is yet another reminder that it's not just good to be the king, it's also good to be on the king's payroll.

According to the BLS , workers in the private sector currently earn, on average, $37.24 per hour in total compensation, comprising $26.36 in wages and $10.88 in benefits. But Americans who work in state or local government earn considerably more. Total average compensation for public-sector employees comes to $54.46 per hour — a combination of $33.76 per hour in wages and $20.70 per hour in benefits. The average state or local government employee, in other words, is paid 28 percent more per hour in wages than the average private sector worker, and enjoys perks worth 90 percent more.

The most significant of those perks, BLS data show , takes the form of retirement benefits. In the private sector, where lucrative pensions mostly funded by employers have largely given way to 401(k) accounts mostly funded by employees, the cost per hour for the average worker's retirement benefits is $1.28. In state and local government, the comparable figure is $6.88. (The BLS release does not include federal employees, whose earnings, on average, are even higher.)

Not every benefit of public sector employment is measurable in dollars and cents. For example, government workers enjoy extremely high job security. "During good times and bad, layoffs and discharges in the public sector occur at just one-third the rate of the private sector," Chris Edwards, the Cato Institute's director of tax policy studies, has noted. "Public sector workers are rarely terminated for cost-cutting or job performance reasons."

Similarly, government employees are far less likely to voluntarily quit than their counterparts in the market economy. "Private employees quit their jobs three times more frequently than government employees do," notes the Federal Reserve Bank of St. Louis in a recent blog post . As an accompanying graph shows, that gap has grown even wider in recent months: The "Great Resignation" about which so much ink has been spilled during the pandemic is a private sector phenomenon. While workers for private companies have been quitting at an unprecedented rate, voluntary resignations from government jobs have been decreasing over the past year. It is plausible to infer that government pay is higher than needed to attract qualified workers.

Yet in some quarters the myth persists that government employees are underpaid, and that their lavish employment and retirement benefits are intended to compensate for their meager paychecks. The reality is that their paychecks aren't meager at all: Government jobs routinely pay more than those in the private sector, and have for quite a while.

Nicely complementing the per-hour statistics from the Labor Department are the annual earnings data supplied by the Bureau of Economic Analysis, an agency of the US Commerce Department. The bureau's most recent figures on the incomes earned by workers in different industries reinforce the message: Government employment tends to be very handsomely compensated.

Last year, according to the BEA, the average private-sector worker received a total compensation package worth $83,598. Employees on state and local government payrolls took home an average of $97,339 in pay and perks. The biggest winners of all were civilian employees of the federal government, whose average annual compensation clocked in at a whopping $117,668.

"The BEA data can be broken down by industry," Edwards wrote in 2019. "Among 21 major sectors that span the US economy, the federal government has the third-highest paid workers, behind only utilities and management of companies. Federal compensation is higher, on average, than compensation in the information industry, finance and insurance, and professional and scientific industries."

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Is it healthy for our democracy that government employees — especially those on Uncle Sam's payroll — should constitute such an elite cadre of lavishly compensated workers? Of course public-sector pay and perks should be reasonable, and of course government employees should be suited for their jobs and competent at performing them. But that doesn't mean that careers in government should be more lucrative than those in almost any other industry.

Roughly speaking, Americans increasingly fall into one of two camps. Those who work for the government — about 15 percent of the labor force — tend to enjoy higher wages, more generous perks, ironclad job security, and pensions guaranteed for life. The rest of us work in the private economy, where millions of jobs can be wiped out by a recession, defined-benefit pensions have all but disappeared, and threats from competition and downsizing are brutal facts of life.

In July 2009, The Boston Globe interviewed Scott Lang, the then-mayor of New Bedford and a rarity, especially among Democrats, in his willingness to call urgently for rolling back public pensions and health benefits:

He says current pension and health insurance systems for city employees have to go, period. If not, they will destroy the city and its ability to maintain the services people expect, like public safety. . . .

"It's absolute insanity. They're unsustainable," he says about pensions. "There isn't the money to pay for an unfunded liability like that. All the revenues will be eaten up by past-due promises."

Not many Democratic politicians are prepared to speak that way. But that may change as public-sector benefits grow increasingly unaffordable. One labor-friendly Democrat who came around to acknowledging the problem is Willie Brown, the former San Francisco mayor and California Assembly speaker. "The deal used to be that civil servants were paid less than private sector workers in exchange for an understanding that they had job security for life," Brown wrote in the San Francisco Chronicle back in 2010.

But we politicians, pushed by our friends in labor, gradually expanded pay and benefits . . . while keeping the job protections and layering on incredibly generous retirement packages. . . .Talking about this is politically unpopular and potentially even career suicide for most officeholders. But at some point, someone is going to have to get honest about the fact.

That point hasn't come yet. But eventually taxpayers will decide that the burden of supporting an overclass of privileged government mandarins has grown intolerable. Here's hoping that day comes sooner rather than later — and that I'm around to see it when it does.