Economics

What's Round on The Ends and High in The Middle? Ohio's Public Sector Salaries, That's What

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"Ohio," writes Matt Mayer, president of the Buckeye Institute, "is facing an estimated $8 billion deficit for fiscal years 2012-2013. As our State of the State report found, state workers today are paid much more than their private-sector neighbors in 85 out of 88 counties."

How much more? About 34 percent more in total compensation (wages, benefits, retirement). Which is cheap: Similar figures for Michigan found public sector workers pulling about 47 percent more than private sector ones. And federal workers earn about 45 percent more than their private sector analogues in total comp.

The Buckeye Institute has a solution for retiring more than one-quarter of the state's gaping deficit hole:

Simply realigning state government worker compensation packages to match those of their private-sector peers would save taxpayers over $2.1 billion in the next two years, which is nearly 28 percent of the $8 billion budget deficit we need to eliminate.

Go here to read "The Grand Bargain is Dead," which details multiple ways to slice the numbers on wages and benefits to pull down costs. It's worth looking through because it gives concrete ideas on how to pull states back from the economic precipice. The idea that governments at all levels can simply keep paying employees the way they have been is simply unsustainable (not to mention unfair to the private-sector citizens who foot the bill).

While the evidence is overwhelming that, with the exception of a few fields such as medicine, public-sector employees are better compensated than their private-sector counterparts, there is still some explaining to do. Meaningful straight-up comparisons are difficult to make and groups such as the Center for State and Local Government Excellence and the National Institute on Retirement Security argue that public-sector workers have more edjumication and degrees than private-sector drones; when you account for that, the public-sector workers make less (about 7 percent less in total compensation).

Such comparisons, needless to say, don't bother to figure out whether degrees lead to productivity gains or are necessary for the work at hand (that would be virtually impossible to do, I think). Given the number of hours worked in public vs. private sectors and the reliance on schooling as a proxy for skills and promotion in the public sector, it seems as likely as not that government workers have more time and reason to get more degrees.

More important, such comparisons don't dispute the fact that the public sector workforce is increasingly expensive as measured by its own baseline. Rather, they contend that the public sector workers deserve even higher compensation because they are older or more educated or do more complicated tasks. Which is another way of saying that it's a damn shame that these gigantic deficits punching through virtually all state budgets like Columbus' own Buster Douglass are getting in the way of paying government workers even more.

Are state workers getting more costly? As the Buckeye Institute, since 1986, state employee annual raises have averaged 3.5 percent. And that doesn't include yearly step increases between 1 percent to 3 percent, and longevity increases for folks working five to 20 years between 2 percent and 10 percent. All that adds up, clearly, as does the massive expansion in the workforce itself (over 90,000 new positions created in the past 20 years).

Many folks don't want to hear that the reason governments are broke is because they spend too much. Cue this article last month from Amy Traub in The Nation:

The budget crises engulfing American cities and states stem from one cause: as Nick Gillespie of Reason repeats ad nauseam, "They spend too much!"—especially on the supposedly lavish compensation of public workers. This simplistic narrative ignores how the nation's deep recession has shrunk city and state tax revenue and omits the fact that plummeting stock markets have decimated government pension funds. To the extent that conservatives succeed in reducing fiscal woes to a case of runaway spending, politicians find it easier to address budget shortfalls with public sector furlough days, wage freezes, layoffs and benefit cuts than with progressive tax increases that, many economists conclude, would cause the least harm to the recovery.

Actually, my simplistic narrative doesn't ignore shrunken tax revenues. It accounts for massive increases in spending during flush years, including on government workers. "From 2002 to 2007, overall spending [by the states] rose 50 percent faster than inflation." What part of "they spend too much!" don't you understand? If your pal went from making $10 to making $15 but then spent $20 and so had to bum money off you, you would tell him he spends too much, right? And to go to hell the next time he's needs a loan.

Traub is right that the stock market crash has put states and municipalities on the hook for cash infusions into their pension funds (which incidentally, have more forgiving governance rules than private-sector ones). Which is, among other things, a great argument for getting government workers out of defined benefit plans and into defined contribution plans (like an increasing number of us toiling in the non-public sector have). It makes it easier to budget into the future and insulates governments from getting socked with bills just as their money has vaporized in a down economy. Which is one reason why the Buckeye Institute suggests just that sort of shift to save Ohio taxpayers a bundle of cash.

To recap: 1. Government workers overall are expensive, both compared to their private-sector counterparts and to their past selves. 2. States can save a lot of bread by bringing government compensation into line with private sector pay. 3. States spend too much, certainly relative to their revenue. 4. It'll Be a Beautiful Day When the Pentagon Has All the Money It Needs and Bombs Schools Having Bake Sales.

Lots of previous posts on the coming war between public and private sector workers.

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41 responses to “What's Round on The Ends and High in The Middle? Ohio's Public Sector Salaries, That's What

  1. Well done as always, and thanks especially for this: whether degrees lead to productivity gains or are necessary for the work at hand

    My pet peeve. As an employer, I’m troubled by degree requirements that I know are nothing more than a way to filter applicants, and have little or no relation to the work required. Degree relationship to productivity can be and is measured, but it’s soft, at best.

    It’s even more egregious in the Public Sector?, as it’s primarily a way to argue for (wait for it) higher wages. But not higher productivity, as you noted.

    Ah well, as one employed in OH but still living in MI, it’s nice to know both states are totally shite in terms of fiscal acumen.

    1. Degrees are only useful as a gauge for entry level positions. After that, they serve no purpose.

      1. Generally agreed.

      2. I think the only thing most degrees do is standardise the way things are done.

        Even medical degrees ( though far from easy to get ) have a standardizing effect on the way medicine is practiced through out the land. And this is probably a good thing. Generally speaking you want your doctor in California to more or less practice medicine the way a doctor in Maine will. Same thing with jet pilots, rescue personal, and the like. People in the business of saving lives need to be on the same page. Hurricane Katirna was an excellent example of this. Coasat Guard personal assmebled on an ad hoc basis to form rescue teams, but because they had recieved the same training they were able to work effectively together. BTW if your job does not involve saving lifes you probably are not entitled to an attitude peace

    2. What degrees do you reckon make a difference if an applicant has them or not?

      1. anything that concerns saving lifes or making duct tape better

  2. One thought: the reason they have to pay more is because that’s what it takes to attract decent applicants.

    I’m a software developer. If the city or state govt. were to offer me equal compensation to what I earn now, I would not be interested. Why? Because those jobs have a reputation for ridiculous bureaucracy, inept management, boring technology, etc.

    To whatever extent those negatives can be addressed, the state will be able to reduce compensation while still retaining the same “quality” of work force. At the end of the day, though, a job working for the govt. is probably never going to be as “sexy” as working in the private sector, meaning they’ll always have to offer a little more.

    1. Why? Because those jobs have a reputation for ridiculous bureaucracy, inept management, boring technology, etc.

      Which is why the worst developers gravitate to those jobs, because it allows them to hide their incompetence, and that in turn makes the whole environment even worse. I would never, ever work for the government. I operate on a “I just proved to you that I do stellar work, now fucking reward me” principle, and government would never do that.

      1. And those same people want to establish standards with which you must conform.

      2. “I just proved to you that I do stellar work, now fucking reward me”

        Do you put that on your cover letter?

      3. Iknow there are still some post offices who are using pre-windows98 computer systems….was told jokingly that by the time new tech trickles down to that post office, it will already be obsolete by another decade or so…………..

    2. Public sector workers already get more in the way of job security.

      1. But this is what the article argues against. At least, its implied. The idea seems to be that the public sector should exactly mirror the private with regard to compensation, time off, security, on-site amenities, etc.

  3. What’s Round on The Ends and High in The Middle?

    AJ Duffy’s fat head, that’s what.

      1. That guy is such a buttsmear.

  4. The whole kerfuffle over degrees is classic bureaucratic thinking – focus on the inputs, not the outputs, to determine quality.

    Look at it another way – why can’t I take these studies to mean that the state underutilizes the people it hires, sticking people in jobs they are overqualified for?

    1. “focus on the inputs, not the outputs, to determine quality.”

      Exactly. We put $700 billion in and that necessarily means we created 16,482,983.7614289246337 job.

  5. The more I read national news on state budgets, the more it seems you basically write the same headline for every state in the nation.

    Is there ANY state that ISN’T completely farked by their public employee pension program?

    1. I believe Wyoming is the one state without a current budget deficit. Perhaps there is a virtue to the unicameral legistlature?

      1. i believe its the only state w/o a corporate/business tax too.

        1. i beleive there is more livestock than people in Wyoming, too. Sorry but my sorry state capital has more kids in school then Wyoming has people. Ido like Wyoming damn beautiful state with some decent people ( cept for the big dick Richard Cheney

  6. Simply realigning state government worker compensation packages to match those of their private-sector peers would save taxpayers over $2.1 billion in the next two years, which is nearly 28 percent of the $8 billion budget deficit we need to eliminate.

    My wife thinks that if she buys her shoes from Payless, she will save the family a good $200.00 per year. I (who understands economics a wee bit better than her) say that if she stops spending the money on new shoes, she would REALLY save the family a bit of money, because paying less for something is NOT SAVING ANYTHING, it is simply paying less for something.

    So, what will really save the taxpayers serious dough is to place all bureaucrats and other tax leeches against the wall . . . Otherwise, don’t bother saying the word “savings”, because it ain’t so.

    1. Particularly egregious is when they call a reduction in the rate of increase of a budget “savings” or a “cut”.

      1. Exactly!! It’s called newspeak by 1984 novelist George Orwell.

        Government bosses have absolutely no incentive to keep salaries down because the more highly paid the people working under them – and the more people under them – the more justification for higher pay for themselves…

  7. Degrees are only useful as a gauge for entry level positions. After that, they serve no purpose.

    They’re “useful” only insofar as they serve as proxy IQ tests, now that employers are legally forbidden from openly relying on those. As the correlation between degree-holding and intelligence has decreased, so has educational requirements’ usefulness in screening out morons. You might have noticed this in real life, where the government is.

    But there’s a massive inflationary bubble that needs maintaining, and credentialism still keeps out almost all the black guys, so…hey.

  8. Rather, they contend that the public sector workers deserve even higher compensation because they are older or more educated or do more complicated tasks.

    But complicated public sector tasks are always outsourced to consultants and contractors. It doesn’t take a lot of education to pester a contractor into keeping up with the project schedule, so we’re left with ‘older’ as the primary factor in higher public sector compensation.

  9. Sadly, the whole debate has (or will) come to this: who has the greater political power? The “public sector” unions or the meaty bulk (to use a butcher’s term) of us strained and desperate commoners? Class war, anyone?

  10. I’m a rational actor. If they don’t fix this soon, I’m going to say “Fuck it” and get a gov’t job myself.

    And then I’ll campaign to give myself a massive pay cut.

  11. Also, these “degrees” gov’t workers get are, I would bet, about 90% useless. I’m willing to wager 100:1 odds the vast majority are not hard science or engineering degrees — or even business/management degrees.

    1. to wager… the vast majority are not hard science or engineering degrees

      Why would they be? The govt doesn’t make anything. Social “science”, political “science” and underwater basket weaving are the preferred routes.

  12. I have a cousin who has a degree in enviromental ecology studies[something stupid along those lines]….she works for child protective services in Tx. She makes $23k/yr. but has kick azz bennies and can retire in 22 years…..

  13. My girlfriend’s an Ohio state employee. She has her masters’ degree, but as a new employee, earns less than almost all the secretaries. The seniority system is just that screwed. Secretaries who’ve been there a long time are earning $60,000 to 80,000 a year. Add that in to the “double dippers” – people who take ‘retirement’, and then are immediately rehired into their old position at 30 years of seniority – thus drawing double salary forever! You can also boost your pension income forever by arranging for tons of overtime in your final year, because your pension is based on your ending salary.

    The other day, the agency paid a whole group of professionals to spend the day doing menial tasks that could have been done by temps at $8.00 an hour. Hilarious.

  14. It is interesting to note that America’s huge economic growth of the 20th century coincided with a growth of public sector employees and unions- that funny i should say. I do also find it interesting that public sector employees pay taxes too- so they are in effect paying for themselves. Now it would seem all to obvious that public sector employees are compensated more then private ones but consider this. In Connecticut the starting wage for a corrections officer is 19.90 an hour- you can get killed doing that job, in Florida police officers need second jobs, despite right wing propoganda most teachers retire making the largest money they make ( in 60,000s range, but it takes 25 years ) and they don’t have social security. My lack of point is this- don’t judge the entire public work force on what you see driving down the highway. Pretty much unless you are the owner of the business everybody is fucking off equally

    1. Pete,

      The irony here is that corrections officers, teachers, police and firemen are held up as the best examples of government workers, because they are. They are also the first on the line for lay-offs when the government needs more money.

      And yet, they never touch the bureaucracy. The school departments should be looking at getting rid of Assistant Associate Vice Superintendents, not math teachers.

      What gets governments in money trouble is a bureaucracy that never makes an effort to consolidate jobs and services. They don’t lay-off people when their jobs are made redundant by 4 other departments that do almost they exact same thing. The concept of “restructuring” is an anathema to bloated governments.

      Worse yet, is that once you have a critical mass of government workers, they can lobby their governments to write their jobs into the law itself. Now you can never get rid of the workers through any normal process, it requires a legislature/committee/board vote as well.

  15. We need to think of degrees and higher education just like a plumber’s tools. Seriously! Do you hire and compensate a plumber, or any worker, based upon how nice of a set of tools they have? Or, do you compensate him/her on how well they can use those tools? The answer is obvious, and yet we compensate workers in the public sector not on how well they can use their knowledge and skills, but how many tools they have! To make the problem even worse, now we have teachers (and other gov’t employees) taking courses on-line of very dubious quality. So now we not only pay for how many tools they have, but the tools are all made out of plastic!

  16. The answer is obvious, and yet we compensate workers in the public sector not on how well they can use their knowledge and skills, but how many tools they have! To make the problem even worse, now we have teachers (and other gov’t employees) taking courses on-line of very dubious quality.dragon ball z dvdThey are also the first on the line for lay-offs when the government needs more money.

    band of brothers dvdbecause your pension is based on your ending salary.

  17. I’m a teacher at a state school for students with disabilities. One thing I can tell you is that we have had pay freezes (no step increases) for about half of my 12 years working there. And for the past two years, we actually took a pay CUT in the form of “cost savings days,” 10 unpaid furlough days. I’m sure there is need for reform within our government, but from where I stand, I don’t see cutting teachers, police officers, firefighters, and nurses as a great solution to the budgetary problems. Quit blaming the people that work hard serving the public and take a deeper look into the bureaucracy…and a governor who pays his staff more than the previous governor did. (Funny, his argument is that he has to pay more to entice the “good” candidates to leave the private sector.)
    One more comment addressing teachers’ degrees and “dubious” quality college coursework: Teachers must align their professional development continuing education (i.e. college classes) with their school’s goals and the state standards for teachers. A Local Professional Development Committee at each and every school monitors the professional development activities of every teacher to be sure that these are relevant, quality activities. Teachers must earn 180 hours of LPDC-approved continuing education every five years in order to renew their teaching licenses. In case you weren’t aware…there you go.

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