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Public Employees Earn Substantially Less than Private Sector Counterparts

Refuting right-wing attacks on state workers, a new report by the National Institute for Retirement Security (NIRS) and the Council on State and Local Government Excellence (CSGE), Out of Balance? Comparing Public and Private Sector Compensation Over 20 Years, demonstrates that state and local employees earn an average of 11 and 12 percent less, respectively, than comparable private sector workers.

In the past year, 42 states have either slashed public employee wages, required furloughs, imposed hiring freezes, or cut state workforce positions.  The Center on Budget and Policy Priorities (CBPP) reports that since August 2008, state and local governments have eliminated approximately 192,000 jobs.  These types of actions not only diminish the quality of public service provision, but additionally hurt working families.

With the economic downturn fostering a renewed interest in public employee compensation and privatization schemes, this report serves as a critical resource to push back against some of the misguided claims that target state workers' wages as a primary cause of budget shortfalls. Some of the most significant findings include:

  • On average, public sector jobs demand higher education levels compared to the private sector. State and local government workers are twice as likely to have a college or advanced degree.
  • Although pensions make up a larger share of public employees overall compensation, state and local workers' total compensation is 6.8 and 7.4 percent lower than comparable private sector workers.
  • The public-private wage gap has only widened in the last 20 years. As the graph below illustrates, state public employees of comparable skill levels were almost reaching wage parity with private sector counterparts in the late 1980s, but their relative pay fell sharply during the 1990s.

The report also analyzes states with large populations -- California, Texas, New York, Illinois, Michigan, Pennsylvania, and Florida -- and finds that this general wage dynamic exists across the country. As the authors point out, "[t]his recession calls for equal sacrifice, but long-term patterns indicate that the average compensation of state and local employees is not excessive. Indeed, if the goal is to compensate public and private workforces in a comparable manner, then the data do not call for reductions in average state and local wages and benefits."

Resources:
Center on Budget and Policy Priorities - An Update on State Budget Cuts
National Institute for Retirement Security and the Council on State and Local Government Excellence - Out of Balance? Comparing Public and Private Sector Compensation Over 20 Years