Are Wisconsin Public Servants Overpaid?
Contrary to some assertions, Wisconsin public servants are not better compensated than their private sector counterparts.
Ezra Klein points to this study, which shows that at least in Wisconsin, all else being equal, public servants are paid less than their private sector counterparts — and yes, that includes both wages and benefits.
It is necessary for making true apples-to-apples comparisons to control for worker characteristics such as education in order to best measure a worker’s potential earnings in a different sector or industry. Controlling for a larger range of earnings predictors—including not just education but also age, experience, gender, race, etc., Wisconsin public-sector workers face an annual compensation penalty of 11%. Adjusting for the slightly fewer hours worked per week on average, these public workers still face a compensation penalty of 5% for choosing to work in the public sector.
So that’s another talking point down.
But personally, I don’t see the point of comparing private vs. public sector compensation. For my own part, I think that public servants should be paid well. As economists are fond of pointing out, incentives matter. And good pay and benefits from the government helps to attract to the best workers to the government — which makes for a smoother running, more efficient government. Underpaying public servants, on the other hand, means that talented people will turn elsewhere — and that inevitably results in less efficient government. Not to mention the fact that anyone who’s ever bothered to open a history book knows that underpaying public servants is a one-way ticket to a system of more bribery and corruption.
So from my perspective, the question isn’t looking to whether public servants make more or less than their private sector counterparts. The question is, is the government paying well enough to attract the best and most talented candidates? Fortunately, most of the people in this country who go to work as teachers, firefighters, etc are willing to take a small salary hit because they want to improve their communities. God bless ’em.
You are not trying to introduce facts into this discussion are you? Silly boy…
What BS.
Wiley:
Do you ever have anything to say?
There is a significant issue with the study, however. It appears (based on word choice within the study) that the authors used average compensation rather than median compensation. This choice causes the private sector compensation to be biased high, as a small number of very large earners (CEOs and such) can have a much larger effect on a mean than on a median. As there is no public sector equivalent to the CEO making millions in bonuses(which is another conversation altogether), the choice of using mean rather than median increases the reported value for the public sector more than the private sector. That is, the reported average does not represent the compensation of the “average worker.” While the conclusion may be correct (I don’t have enough data to say either way, and the study didn’t report any raw data), the reported graph is disingenuous at best. I suspect that the conclusion is at least partially correct, but the authors of the study decided to use the average numbers to give their results more “pop”, and the truth is that total compensation is a bit more comparable.
Fact is Alex, if you work in the public sector there is no requirement to produce. If you work in the private sector, to get that money you made up for your graph, you have to produce or you will lose your job. By the way, outside of education, what good are Ph. D. anyway? I would like to see the numbers you produce for your graph explained differently. How many of those with advanced degrees, in the private sector, get 13 to 14 weeks off from work? How many get pensions paid for by their employer? (oh I forgot, they do contribute .02%) What is it you are trying to prove? That you are always on the wrong side of issues?
Does anyone else get the feeling wiley has led a very sheltered life?
I think he’s more stoner than Wiley.
@Wiley
“…outside of education, what good are Ph. D. anyway?”
Call up Gen Patreous and he’ll explain it to you. Maybe.
If reducing wages will lead to graft and corruption, I think we need to calculate whether the median taxpayer would pay less in out of pocket administrative expenses (bribes) than they would save in taxes.
The article makes a weak attempt to correct for education but having all of the Doctorates of Education that are teachers makes the public sector look lower. How many people who have a masters in engineering work for the state or local governments.
Also, the article does not appear to allow for location. In most of Wisconsin, the best paying job in any town in a government job. It takes a large urban area to produce to kind of jobs that make more than government employees make. That is why it is so hard to get a government job in a rural area or small town.
Alex,
The general claim made — and I’ve made it myself — is that the average public worker makes more than the average private sector worker. Which is certainly still true in Wisconsin. Controlling for education, however, that largely goes away.
Some of the comparisons are odd, though, off the top of my head. For example, I’d assume most PhDs work for the state’s colleges and universities. Those in the private sector either work for private colleges or in more lucrative research fields. But that’s somewhat apples-to-oranges. (As is, granted, comparing public to private without controls.)
Nor is it shocking that lawyers and doctors make more in the private sector. (No word on cowboys and “such.”)
One presumes, too, that most of those with masters degrees in the public sector are schoolteachers with joke MAs in Education, whereas those in the private sector have legit degrees.
“One presumes, too, that most of those with masters degrees in the public sector are schoolteachers with joke MAs in Education”
I wonder. In California, for instance (unless it’s changed), if you taught history in high school, and went for an advanced degree, the degree had to be in history — none of that Education bogosity.
” For my own part, I think that public servants should be paid well.”
Agreed. But for that compensation the state should expect good results. From what I have heard, the educational standards in Milwaukee are pathetic at best.
If a process doesn’t work, it needs to be changed and that is the crux of this problem. The unions prevent the very change that is needed.
Sam: That would be great; most states don’t do that. Indeed, the teachers unions decidedly don’t want that, as it breaks their monopoly. In Alabama, I wouldn’t have been permitted to teach the high school government course despite having a PhD in political science from the state’s flagship university and having taught in students there and at another university in the state.
And, to be clear, I actually think Education degrees make perfect sense for elementary and special education teachers, where pedagogy is more important than subject matter knowledge.
“I think we need to calculate whether the median taxpayer would pay less in out of pocket administrative expenses (bribes) than they would save in taxes.”
Well, I did the math and corruption would most definitely be cheaper. Ooops, forgot to carry a one. Re-calculating and………never mind.
At any rate, I’m with you, Alex. There is little point in comparing public sector and private sector workers. Even among the private sector, there is a range for every job based on experience, education, need, location, etc.
The question should be, are public workers being paid too much for what they are doing? Let’s ask the armchair budget busters. They know all.
If you work in the private sector, to get that money you made up for your graph, you have to produce or you will lose your job.
Spoken like someone who has never worked in the private sector. Its not the fantasy model of fairness and efficiency you seem to think it is.
By the way, outside of education, what good are Ph. D. anyway?
Apparently its good for 30K a year in the private sector.
How many of those with advanced degrees, in the private sector, get 13 to 14 weeks off from work?
Its a fallacy that these workers automatically get those weeks “off”. But even with that, the study did compare working hours, and it found that public workers are still paid less on an hourly basis.
Interesting numbers. I definitely would like to see a comparison of the mean numbers versus the median, as stated above. Also, the one big thing that this comparison can’t control for is the insane amount of job security that comes with the public sector. It is nigh impossible to fire a teacher (or a policeman, for that matter).
James,
You continue to focus on the teachers’ union. The bill in Wisconsin isn’t only about the teachers’ union, it’s about ALL public unions (except the fire and police, who supported Walker in the election) As a software developer working for the state of Wisconsin, I know for a fact that I’m underpaid relative to the private sector, but Walker’s bill would further restrict my pay.
Also, it’s nice that you have the luxury of being able to “presume” away facts which don’t fit your viewpoint.
I think the issue is more one of when you have Wisconsin teachers making as much as $116,000, plus almost $50,000 in benefits, living and teaching in communities where the average _household_ income is under $50,000, the need for collective bargaining seems to be overkill and raising taxes on everybody to pay for it isn’t fair.
PD,
No, they aren’t.
“In Alabama, I wouldn’t have been permitted to teach the high school government course despite having a PhD in political science from the state’s flagship university and having taught in students there and at another university in the state.”
A lot of chemists: mechanical, electrical and chemical engineers; economists; and managers I worked with in the oil business would consider a PhD in political science a joke degree. I hasten to add I don’t but that’s probably because I did politics, economics and philosophy at undergrad and would love to do a PhD in political science. The point is joke degrees are very much in the eye of the beholder JJ. And what exactly is the difference here:
“where pedagogy is more important than subject matter knowledge”
Is it because I’m not an educationist that I don’t know? Looking at this chart and its provenance, it’s probably not that far off the mark particularly since it encompasses all state employees not just teachers and it’s fairly compelling. I certainly see nothing in it that is particularly counter intuitive so even sensible attempts to discredit it on a blog come off looking a bit silly. Obviously public sector workers have a lot more security, their pensions are generally safer and so on but is this really any reason to attempt to remove their collective bargaiing rights which is what this dispute is really about?
“I think the issue is more one of when you have Wisconsin teachers making as much as $116,000, plus almost $50,000 in benefits, ”
PD, where do you get that?
Patrick,
From what I can tell, Wisconsin appears to be above average compared to the other 49 states, though not in the top ten.
“By the way, outside of education, what good are Ph. D. anyway?”
This has to be one of the most stupid comments ever made by someone whose got quite a record in the Stupid Comment department. The pharmaceutical, advanced engineering and biotech industries have rather a lot of them.
tom p, I got it from the database of Wisconsin salaries. You can say I cherry-picked it (i.e., it’s the highest in the state), but it exists. Would you like me to name her name?
Call me crazy, but I don’t think state/national policy should be determined based off of anecdotal evidence.
I hate to break it to you, but salary should be set by one thing: the number of qualified applicants.
If you’ve got too few applicants, raise the pay. If 3000 would-be firefighters show up for 1 position, lower it.
This is probably the fundamental split between right and left. People on the right accept that market prices may seem odd, or unfair (pop stars make more than teachers, right?), but at least those prices continually readjust to circumstance. There are feedback loops.
People on the left are more ready to say that wages should be “set” according to some “fairness” model. The problem with that, IMO, is that it can go far off the rails. Whoever has the most political juice gets the best wages.
Witness the police and firefighters being shielded in the Wisconsin change.
There’s more to the division than that. It seems to me you’re neglecting to take into account the idea that the government should incentivize public service. Either that or you reject the proposition.
Counting the applicants is a pretty fundamental way of measuring the incentive!
Wiley, I have a Ph.D. in Engineering, a pension, and 5 weeks of paid leave. If I stick around with my current employer for 20+ years, that’ll go up to 13-14 weeks. I also get a match on my 401k. And guess what: I work in the private sector.
> . From what I have heard, the educational standards in Milwaukee are pathetic at best.
Fox & Friends?
“People on the left are more ready to say that wages should be “set” according to some “fairness” model. ”
I don’t think they do particularly. Pay levels in fact aren’t usually determined by demand as you suggest (except at the margins) they are based on academic attainment/experience. Over the last couple of years the demand for legal associates in NYC has been severely depressed but it hasn’t made a noticeable ding in pay levels. In depressed state like MI there’s probably a surfeit of machinists and while this might have a mildly depressant effect on overall wage rates it’s not going to be massive, same with plumbers in NV. Wages and benefits within occupations are fairly inelastic in practise within a geographical market.
Here is a link to the Wisconsin teacher salary database if anybody wants to play with it. The highest teacher salary in the state is at the East Troy Middle School, it’s $116,066, plus $41,753 in benefits.
http://www.jsonline.com/watchdog/dataondemand/33534649.html
As far as I know the teacher is worth it, i.e., that’s what the school district would have to pay to retain a teacher with her credentials. It might be other factors that the law is intended to limit against.
Disproved by starting salaries for various majors.
History PhDs make less than Petroleum Engineering PhDs (heck, less than Petroleum Engineering BS).
john personna says:
Tuesday, February 22, 2011 at 11:04
Disproved by starting salaries for various majors….History PhDs make less than Petroleum Engineering PhDs (heck, less than Petroleum Engineering BS).”
JP: you’re really going to have to improve your comprehension skills It may have escaped your notice but people with history PhD’s are generally pursuing different occupations than those Petroleum engineering degrees. You obviously didn’t read or understand the thrust of my comments or even my concluding sentence which couldn’t be clearer really viz:
” Wages and benefits within occupations are fairly inelastic in practise within a geographical market.”
Sorry, I saw you dancing, but couldn’t follow the tune.
Fact is, discipline matter hugely.
Now, dance again.
I am with the union protesters because I believe in the United States we are allowed to stand up for our rights,however I do believe some take advantage of things. I would start at the top and see if they enjoy taking a cut. To Alex Knapp I cannot believe you think we should pay more to keep corruption out of the government. When has this ever deterred that from ever happening. Everyone needs to look around to see what they can do to save money. It really bothers me when we are told to tighten our belts and these same people decide to remodel their offices, paid for by the taxpayers.
john personna says:
Tuesday, February 22, 2011 at 11:30
“Fact is, discipline matter hugely.”
Er…didn’t I say so.
Of course, the fact that the teaching profession has proliferated a rather significant number of marginally useful master’s degrees is besides the point I guess. You practically can’t get a job in a grade school in my district without a master’s degree, but I struggle to see the value. And you can imagine how much I value PhD’s in education, but perhaps that is besides the point.
If understand the desire to take the union side no matter what, but perhaps the people of Wisconsin through their lawfully elected representatives are pushing back. Isn’t that their right? If Wisconsin wants to have “worse” teachers by lowering their pay if I understand our complaint, isn’t that their right? Is the federal republic dead?
I’m unimpressed by the analysis. Comparing averages only for different sub groups in a population can be misleading if you don’t provide other statistics on the two sub groups. For example, are the professional degrees being distorted by high earning outliers for the private sector? What is the median value for each degree level?
Even better would be to do a regression analysis with various dummy variables to account for all of these demographic variations as well as public and private employment (a fixed effects model) or you could estimate two separate regression models allowing for variation in all of the relevant variables not just the intercept(a random effects model).
So,
That might be a tad bit hasty.
Everyone knew (or should have known) that, with a Republican governor and legislative majority, we were going to lose salary and/or benefits. The protests are not about losing the money, they are about trying to protect what remains.
As someone who has spent time protesting Walker’s “fix” every day since last Monday, I can say with some authority that the initial protests were about trying to slow down the process. Walker issued this bill on a Friday, lawmakers received their copies on Monday, and were expected to vote it into law on Wednesday or Thursday.
Having slowed the process down enough that people can examine the details of the bill (and some odious things are indeed being found), the protests are now about keeping some sort of collective bargaining.
My fear is that, even though Walker has hit us with an effective 10% salary cut, he’s got something even worse planned once he’s gotten rid of collective bargaining. That is why I continue protesting.
And, just to repeat what I’ve written here before, I’m a software developer who is already underpaid by the state. The benefits we get are nice, but I would have been MUCH better off if I’d stayed in Silicon Valley, even taking into account the dotcom bust.
I’m not working here for the money, I’m here because I feel like I’m making a long-term contribution. These cuts have me second-guessing my devotion to my current project, and if Walker continues to chip away at my salary and benefits, I’ll basically have no choice but to leave. I feel some real loyalty to the project and would be deeply saddened to walk away and leave it unfinished.
Steve Verdon says:
Tuesday, February 22, 2011 at 16:12
So you think it’s broad conclusions completely wrong?
Joe,
It is quite possible. One reason we use medians in looking at incomes and such is because outliers can distort the mean. For example, what effect do guys like Bill Gates, Warren Buffet, Mark Zuckerberg, the other multi-billionaires from Microsoft, the Google guys, etc. have on the average level of wealth in the US vs. the median. Same thing goes with income. Basically the mean is sensitive to extreme values, the median is not and in reporting income numbers it is the median that is considered the best measure of "typical".
BTW, I see Jason already made this observation in like the 3rd or 4th post and most people ignored it. It is a seriously valid objection to use the mean. A CEO's compensation that has several million in stock options, could very well distort the numbers. Especially at the Bachelors + level since many CEOs probably have at least that degree or more. Add on other officers for large corporations that get stock options or other large salary/benefits and you have a biased statistic that isn't giving us a clear picture of what is typical.
Typical of the innumerate.
What you are sayind Dave G, is that you value your contribution more than the money, but you want the money too.
That's kind of a problem. I mean, say I'm making $150K programming in private industry, and I decide to make a contribution to society. Should the state have to match my previous wage? Why should it come with me, if I'm not doing that role valued by the market?
"Yes Principal Skinner, I used to set up corporate databases, but I now want to do your school web page. Here's my salary history."
John,
No, I don't want *the* money, but I want SOME money. Under Walker's "fix", the BEST I'll be able to get is a cost of living raise (and, since that's negotiable, I may not even get that). This would be an improvement since we've only seen salary decreases for the past few years.
Assuming Walker continues to decrease benefits and/or salary, at some point it won't make sense to work for the state.
If software developers can make $150K in private industry, and the state is only offering $50K, is it realistic to expect that the state will be able to fill those positions?
> I used to set up corporate databases, but I now want to do your school web page
Well, this might be how a "liberal" would see it:
I used to set up corporate databases, but I now want to get your students on the road to making 150k setting up corporate databases.
Job growth in the web publishing sector was +5.5% last year, and my friends who are looking say the jobs are out there, at least where I live. I am not sure I would be so quick to make fun of a high school having a decent website, especially if the students are walking away with the skills to create on.
That might be the best way to move the state wage Dave, take that corporate job.
anjin, there's a wage pyramid in web jobs. the way it works out is that the more accessible technologies have a wide pool of providers, and their rates are lower. the rarer skills, even if they aren't particularly harder, demand more.
the point of the story was not to make fun of web sites, but to point out that no one needs to pay database architect rates for their creation. that's just the way it is.
now, we can hope that "i'm underpaid" claims (both in public and private sector) are comparing to the work actually being done, and not the job that person would do, if they were looking for more money.
> the point of the story was not to make fun of web sites, but to point out that no one needs to pay database architect rates for their creation. that's just the way it is.
I know a lot of people who make 100-150k for jobs in web publishing. In fact, its pretty hard to "create" an enterprise ecommerce site without a database architect. You don't sound as if you have much experience in this field.
> the rarer skills, even if they aren't particularly harder, demand more.
Not really sure what "rarer" means. There are plenty of high end java developers, for example. There is nothing rare about them. But that sort of work is actually quite a bit more demanding than say, HTML development or basic business analysis.
"Not really sure what "rarer" means. There are plenty of high end java developers, for example. "
No there are not, relative to need.
"I know a lot of people who make 100-150k for jobs in web publishing."
So that's what you'd pay the next PHP programmer in the door?
To John Personna
Everything you said so far has been wrong. Do you seriously believe people should be paid by how many applicants are turned in? What about the saleries of these companies that make multi=million dollar saleries each year and get bonus`s on top of that? Why are you picking on the middle class. Its people just like you that made others form unions in the first place. People like you discust me
You could read Dave’s piece Barb, also on market mechanism:
http://theglitteringeye.com/?p=13071
The main thing is, once you stop looking at supply and demand, you have to chose someone’s random opinion in place of it. Are teachers worth $50K? Why not $100K? Why not $200k?
“Do you seriously believe people should be paid by how many applicants are turned in?”
By the way, it isn’t so much what I think “should,” its the way I think the world has worked, for much longer than I’ve been alive.
That said, the market mechanism has that advantage that it is a aggregate decision, of all players, and not subject to the whims of a clique.
Who are you and what have you done with john personna?
I think this is right. If you have 1 job opening and scores of applicants than it is likely the wage is too high and too many resources are being allocated by people to try and secure that job.
As for the complaint about upper management and multi-million dollar salaries, that is a valid topic, but if your belief is that they are over-paid and that some how justifies over paying teachers or government workers I’m afraid you have a rather nonsensical position.
> So that’s what you’d pay the next PHP programmer in the door?
Nope. Probably about $40hr. as a contractor. I said I know a lot of people making $100-150K, not everyone. I am talking about web producers, sr. java developers, release managers on enterprise level sites, etc.
> No there are not, relative to need.
That’s a crock cooked up by large employers to keep H1B visas going. Indian developers are wonderful worker bees (not a knock, I have worked with a lot of excellent engineers from India), they work for less, are very good at executing requirements, and are are generally happy just to be here and never cause trouble. It is a market manipulation designed to drive down high labor costs in IT departments.
I think anjin, that you have been fighting a deplorable retreat with misdirection here.
Steve, I’ve always been the big moderate, and this is one of those issues that shows where I split from the true left.
. I think anjin, that you have been fighting a deplorable retreat
then you are probably thinking too much…
Having read about 40 comments just now I realized no one mentions what makes THIS private-sector worker mad: public sector workers’ pensions and sometimes their share of taxes are paid by – no, not ‘the government’ – ME! Current state managers (i.e. Governors) are being forced to deal with what IS, not what IF. What IS is that states are broke. How did they get there? Well, considering that in any business, the largest expense is payroll, we must assume that public payrolls are more costly than can be afforded by the payor, namely, the taxpayer. In my town of 3600, the city Clerk makes $55k plus another $40k in benefits. I work as a secretary, too, but make $36k, no pension, no benefits. However, out of my share of taxes is paid the city Clerk’s portion of FICA (meaning, she doesn’t pay it), AND an 8% contribution to her retirement fund, AND a portion of her health care benefits. Now I ask you: why are MY taxes going to pay her benefits package? WHY? Because some highly paid public servant made an agreement with the union on behalf of the rank and file public servants. I’m quite pleased to hear Governors now suggesting that they should pay heed to ALL the citizens of their state, not just the needs of the public sector. It is not up to me to ensure the retirement, or health care, or taxe of the public sector, period. After all, they don’t pitch in a SINGLE PENNY to any of these things for me.
As for the you-get-what-you-pay-for argument, it’s baloney. Many public and private sector employees just don’t have a good work ethic. The difference is that management can’t fire the public sector employee. My biggest complaint with unions, whether public or private, is that a bad employee can’t be fired, even if there is tons of documentation. So, they drag down the rest of the crew. This can be fixed, but the unions must have union dues to keep up their lifestyles (“fish always grows to the size of his fishtank”) so they fight management to the death to keep the crummy workers around. Unions should ALLY with management to provide good workers, not be a thorn in their side. Unions started as a cause, then became a job, and now they are nothing more than a racket.
In my humble opinion, the WI situation (which is coming to a California near you) is resulting in neighbors turning on neighbors, and that can’t be good for the country’s social health.
A man called the Lars Larsen show (conservative radio host) because he was mad about the bonus`s given to baled out bank execs. He essentially said they should get the bonus`s because that was the deal they made with organization.
My question is: Why is it different for the union workers, are they reneging on a deal.
http://blogs.forbes.com/rickungar/2011/02/25/the-wisconsin-lie-exposed-taxpayers-actually-contribute-nothing-to-public-employee-pensions/
You don’t actually contribute to their pensions. Read more next time before parroting ignorant remarks.
Well, Laurie might be right about pensions in other states for gov. employees, but here in Wisconsin the pensions come out of those worker’s checks.
Here in Wisconsin we also have a tradition of treating each other with dignity, and right now we’re being forced to suffer a Governor that threw his dignity aside long ago. Our teachers form the backbone of one of the best education systems in the country, and I would gladly pay increased taxes to keep our kids educated.
http://edmoney.newamerica.net/node/36914
http://en.wikipedia.org/wiki/University_of_Wisconsin%E2%80%93Madison#Rankings