Henry Blodget passes along this startling statistic:
The average federal worker makes $75,419 a year, while the average in the private sector is $39,751.
Why is that, exactly? Is it because Federal workers are 80% better than private-sector workers?
And remind us again why, in the interest of cutting the deficit, the government shouldn't just slash 20% of its budget across the board?
Why indeed.
The only problem is that this figure is wildly inaccurate. It comes from a newsletter by investment personality John Mauldin, who doesn't say where or how he got it.
I assume Mauldin took the average pay for all private sector jobs and compared it with the average pay for all government sector jobs. But this isn't an apples-to-apples comparison. The pool of jobs in the two sectors is likely to be very different.
So, using data from the National Compensation Survey, I matched 588 common jobs in the private and public sectors. This chart looks at how the pay differential between the two sectors changes as we move up the pay scale in the private sector:
Two things should be apparent: Gov't employees have higher compensation at lower-paying jobs, and the reverse is true at higher-paying ones.
Overall, the average pay for a government employee is $49,479 while for a private sector worker it's $40,996. That's a 20% difference, not 80%.
Does this mean that we should cut the pay of the average public employee by 20%? (A back-of-the-envelope calculation puts the cost savings from this at $94 billion.)
I don't think so. One reason: By choosing to work in the public sector, a person pretty much gives up the option of having a high or very high salary, so the pay differential may compensate for that. Are there other reasons?
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COMMENTS (6)
This is just asinine, especially from people who are so gung-ho about the notion that the market sorts everything out perfectly. If you pay people crap wages, what sort of workers do you expect to attract? The ones that aren't talented enough to take the private sector equivalents. That's a recipe for an efficient civil service, obviously. Not only is there less chance for talented people to advance to the same heights in the public sector as the private, like you mention, but you're also talking about a lot of jobs that don't confer much in the way of social prestige. (Plenty of people can rationalize the trade-off of lower wages in a widely respected position like teacher or firefight ... view full comment
This is just asinine, especially from people who are so gung-ho about the notion that the market sorts everything out perfectly. If you pay people crap wages, what sort of workers do you expect to attract? The ones that aren't talented enough to take the private sector equivalents. That's a recipe for an efficient civil service, obviously. Not only is there less chance for talented people to advance to the same heights in the public sector as the private, like you mention, but you're also talking about a lot of jobs that don't confer much in the way of social prestige. (Plenty of people can rationalize the trade-off of lower wages in a widely respected position like teacher or firefighter, but it's a lot harder as a mid-level office worker for the Department of Labor or the IRS.)
Furthermore, a truly fair comparison would have to break down the public-private disparities in various markets, since the federal pay scale is tied to cost of living in different regions.
Full disclosure, I'm a federal employee, so I've got a little skin in this game.
Henry Blodget joins my long list of dishonest hacks, whose every word should be ignored.
Henry Blodget joins my long list of dishonest hacks, whose every word should be ignored.
Of course we do adaglas-are you kidding? At $40,000 to $50,000 per year jobs, we're not talking about "prestige jobs". When you consider these differences:
Gov't health care is much better for their workers
Retirement packages are signficantly better-usually defined benefits, with retirement possible at excellant level after 30 years on job
Don't know about quality of workers at state/fed level-you do get what you pay for.
My guess---we're overpaying these guys about $10,000 per year. With 4 million fed workers, that's $40 billion-a start on deficit reduction.
Of course we do adaglas-are you kidding? At $40,000 to $50,000 per year jobs, we're not talking about "prestige jobs". When you consider these differences:
Gov't health care is much better for their workers
Retirement packages are signficantly better-usually defined benefits, with retirement possible at excellant level after 30 years on job
Don't know about quality of workers at state/fed level-you do get what you pay for.
My guess---we're overpaying these guys about $10,000 per year. With 4 million fed workers, that's $40 billion-a start on deficit reduction.
Is that figure of $49,479 overall compensation or salary?
Lobosven, those retirement and health benefits are the reason we government workers can safely enter a field with lower wages. Without them, no one would want to work in government.
Is that figure of $49,479 overall compensation or salary?
Lobosven, those retirement and health benefits are the reason we government workers can safely enter a field with lower wages. Without them, no one would want to work in government.
Mr. Elliott-the figures show public workers make more than private workers-so why do you need insanely expensive health and retirement benefits? You know the people in your office, as retirement approaches (your defined benefits plan usually averages last 3 years of service), starting to work OT, using less vacation and sick leave (you can monetize some of that in pay).
I'll accept some blowback from a policeman, fireman or prison worker-otherwise, you guys have nine to five jobs with incredible job security.
The figures above are wages-it's impossible to value health insurance and pensions.
I'm watching the States of California and New York literally head into bankrucpty due ... view full comment
Mr. Elliott-the figures show public workers make more than private workers-so why do you need insanely expensive health and retirement benefits? You know the people in your office, as retirement approaches (your defined benefits plan usually averages last 3 years of service), starting to work OT, using less vacation and sick leave (you can monetize some of that in pay).
I'll accept some blowback from a policeman, fireman or prison worker-otherwise, you guys have nine to five jobs with incredible job security.
The figures above are wages-it's impossible to value health insurance and pensions.
I'm watching the States of California and New York literally head into bankrucpty due to the public employee union's push on wages and benefits. what's more incredible-you give campaign contributions to the same people who set your wage and benefit levels. In some states, you've formed your own party to gorge at the public trough.
I've had contact with much of you-you wouldn't last a day in the private world.
I work for th public sector. Our jobs are consistently underpaid for the type of education and experience you need. Private-sector studies have proven it over and over again. It's actually pretty difficult to get your foot in the door initially for mid-to-high level jobs like mine. Once your foot is in the door it is a bit harder to lose your job, but not that much harder in a deep recession. They just eliminate the program and ......poof.....the employees are gone, too.
Yes, I appreciate the job security but, that is becoming more and more tenuous as our revenues continue to drop with the economy. We do tend to carry a bit more dead weight than the private sector, but this bad economy ... view full comment
I work for th public sector. Our jobs are consistently underpaid for the type of education and experience you need. Private-sector studies have proven it over and over again. It's actually pretty difficult to get your foot in the door initially for mid-to-high level jobs like mine. Once your foot is in the door it is a bit harder to lose your job, but not that much harder in a deep recession. They just eliminate the program and ......poof.....the employees are gone, too.
Yes, I appreciate the job security but, that is becoming more and more tenuous as our revenues continue to drop with the economy. We do tend to carry a bit more dead weight than the private sector, but this bad economy is giving our managers alot of leeway to get rid of those employees they haven't managed very well for a long, long time. The bad thing is that many of these decisions are based on internal politics and who sucks up to the boss rather than objective performance. Our public employee's civil service protections are pretty much nonexistent once they've made up their minds to can you.
Yes, I appreciate the better benefits that we supposedly have. I say supposedly because that was true ten years ago but certainly isn't anymore. Our health benefits keep getting more and more expensive, our co-pays keep going up while our coverages keep going down. We had a one-year increase of 29% in our share of the health premiums in 2008! It's no different than the challenges everybody is facing right now. We need health care insurance reform more than ever. Many of our older employees are scared to death they'll get RIF'd and lose their dwindling health insurance and their years of paid retirement permanently. Even the government can hire three twenty-somethings cheaper than one fifty-something.