Comparing Public vs. Private Pay

The two charts you see on this post come from a press release issued today by the U.S. Bureau of Labor Statistics. The charts break out the pay (wages and benefits) of state and local employees vs. private employees as of Sept. 2010. (The bars labeled “civilian” refer to the two groups combined. Federal workers are not included.) The data do not allow California to be broken out. The figures underlying the charts are for the total U.S.

In a sense, the charts explain the seeming public anger at public employees who earn in total compensation about $40 per hour vs. about $28 per hour for private workers. Moreover, public workers get more in health benefits and retirement benefits (especially defined benefit plans) than private. The press release explains that you cannot make a simple comparison because the occupational mixes of public and private sector workers are quite different. But that doesn’t quiet those who are upset, particularly in economic Hard Times.

The press release does permit one adjustment which is quite revealing. It has long been known that large private employers pay more in wages and benefits than small employers. The reasons for this finding have been debated in the economic literature. One view is that for various reasons, larger establishments need more stable, career-oriented workforces. The press release allows a breakout of private employees at establishments with 500 or more workers. Below is a table I have extracted from the release comparing pay at those larger private establishments with state and local workers. Note that most state and local workers are employed by large organizations.

State & Local……………. Private > 500
——————————————–
Total Comp
(wages+
benefits)………$40.10………$39.96

% of pay
paid as
wages………….65.6%………..66.4%

% of pay
paid as
benefits……….34.5%………..33.6%

——————————————–

% of pay
for health
benefits……….11.6%…………8.6%

% of pay
for pensions……8.1%………….5.2%

of which:
Defined
benefit………..7.3%………….2.6%

Defined
Contribution……0.8%………….2.6%

——————————————–
Legally
mandated
benefits……….6.0%………….7.2%

of which:
Social
Security &
Medicare……….4.7%………….5.7%

——————————————–

The press release is at http://www.bls.gov/news.release/pdf/ecec.pdf

So what do we learn from this comparison? Large private organizations are similar to state and local organizations in total employee compensation, including the broad mix of wages vs. benefits. Within benefits, state and local workers get more compensation in health and retirement benefits (especially defined benefit pensions). Since some state and local workers are not covered by Social Security and Medicare, less of public benefits goes to those programs than in the private sector.

Now you can quibble with the numbers. We have not standardized for occupation and only crudely for employer size. We have not broken out California. Etc. Etc. But at the least what is shown is that even a little standardization goes a long way in closing the seeming public vs. private gap in pay. That won’t stop folks who want to be angry from being angry. But these are the numbers.