Wednesday, April 28, 2010

The Public Sector

Seems like a week does not go by without a letter to the editor or a story about how teachers, firefighters, police and all government employees should lose wages and benefits because someone in the private sector has lost theirs.  The contention is that these people are all over-paid and some suggest they have 'cushy' jobs.  Which makes me wonder why the letter writers did not opt for the public sector.

We all make career choices.  We all make choices about furthering our education.  Teachers and professional employees do not enter the work force at eighteen years of age fresh out of high school (as did many people I knew in the neighborhood I grew up in).  Many leave college with mountains of debt and four or five years of lost wages, to boot.

A report last year from Charles Ballard at Michigan State University was dissed by many people when it came out.  Now, a report from the Bureau of Labor Statistics comes to the same conclusion as Professor Ballard:

BLS Reports on Employer Costs for Employee Compensation

On March 10, 2010, the U.S. Department of Labor’s Bureau of Labor Statistics (BLS) issued its report: Employer Costs for Employee Compensation – December 2009. According to the BLS, at the end of 2009, employers in private industry paid employees total compensation averaging $27.42 per hour worked, consisting of $19.41 in wages and salaries (71% of the total) and $8.00 in benefits (29% of the total). By comparison, the total compensation costs for state and local government employees averaged $39.60 per hour, consisting of $26.11 in wages and salaries (66%) and $13.49 in benefits (34%).

However, the report warns that the compensation costs of state and local governments should not be directly compared with the costs in private industry due to differences in the occupational structures between the sectors.  The report notes that professional and administrative support occupations account for two-thirds of the state and local government workforce, compared with one-half of the workforce in private industry. 

Moreover, if average compensation costs for the “management, professional, and related” occupational group (which includes teachers) are compared, total compensation is similar for private industry and state and local governments, as shown in the following table:

                                           Employer Costs per Hour Worked
                      Management, Professional & Related Occupational Group
                                                             December 2009

      Private Industry                State & Local Governments 
 Avg. $/hour        % Total                Avg. $/hour         % Total
Wages & salary              $34.12                  71%                   $32.96                    68%
Benefits                             $14.07                  29%                   $15.19                    32%
Total Compensation      $48.19                100%                   $48.15                   100%

Source: U.S. Bureau of Labor Statistics, Employer Costs for Employee Compensation – December 2009. Data compiled by Gabriel Roeder Smith from Tables 4 and 9.

The BLS report is available at:

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