BREAKINGVIEWS-US could save by cutting public sector pay
-- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --
WASHINGTON Feb 3 (Reuters Breakingviews) - The European Union wants financially strapped Greece to cut the pay of government employees. The same prescription could help in the deficit-ridden United States. Including benefits, civilian federal employees are on average paid double what private sector employees get.
Federal employees are on average older and somewhat more highly qualified than private sector employees, although fewer have the highest educational qualifications. A moderate premium over private sector remuneration is thus justified. But this premium has increased dramatically in the past decade or so.
In 1998, the average civilian U.S. government employee's wages were 36 percent higher than in the private sector. Including much more generous benefits, total compensation was 70 percent higher in the public sector -- a significantly smaller premium than today's.
State and local government employment costs have also risen faster than private sector employment costs, by 15 percent from 2005 to 2009 compared to 10.4 percent in the private arena, even though state and local governments have been budget-pinched by the recession. State and local employees currently receive a smaller premium over the private sector than federal workers, but are on average less qualified than the private sector.
The expansion of the public sector premium is partly due to the fact that government jobs are more recession-proof than private sector jobs. One elegant way to recognize this benefit could be to discount federal pay scales by the unemployment rate, so that with 10 percent unemployment bureaucrats would receive only 90 percent of their scheduled pay. Their remuneration would then increase faster than inflation as economic recovery occurred.
Rolling federal employee pay back to where it was in 1998 relative to the private sector and shifting state and local government pay back to 2005 relative levels would save $116 billion annually from government costs. The EU suggests the Greek government should replace only one in five retiring employees. While any cuts in pay or benefits would be controversial, the U.S. government wouldn't have to do anything that drastic to make big savings.
CONTEXT NEWS
-- The European Commission, in a report issued Feb. 3, suggested that Greece should cut public sector pay costs by replacing only one of every five retiring civil servants.
-- In the United States, average civilian federal wages per full-time employee were $79,197 in 2008, compared to private sector wages per full-time employee of $50,028, according to Bureau of Economic Analysis data. Including benefits, total compensation per employee was $119,932 in the public sector compared with $59,909 in the private sector.
-- The premium for federal employees over private sector employees has increased since 1998 in wages from 36 percent to 58 percent and in total compensation from 70 percent to 100 percent.
-- The Bureau of Labor Statistics' Employment Cost Index for private sector employees increased by 1.2 percent in 2009 to 110.4, with the index set at 100 in 2005. For state and local government administrative employees it increased by 2.4 percent to 115.0.
-- Public sector employment costs in 2008 totaled $1.6 trillion, of which $467 billion related to the federal government and $1.1 trillion to state and local governments.
-- For previous columns by the author, Reuters customers can click on [HUTCH/]
(Editing by Richard Beales and Martin Langfield)
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Really? Has this been verified?
My father was a federal civil servant. I never saw any indication that he was paid twice other people were making.
I was a state civil servant. I KNOW I was making a lot less than my private sector peers back then.
And the author probably thinks that the rich should get more tax cuts as well.
Why not cut all contractors’ fees in half while we’re at it? That would certainly help our deficit as well!
The reason it looks like feds make so much more money is that there are virtually no entry level feds left. Take a look at the charts in this article:
http://www.fedsmith.com/article/2100/federal-employees-their-pay-how-they-stack.html
If you look at the distribution you’ll notice that there are very few people in any of the pay grades below a GS-7, which is about where honors graduates with a bachelor’s degree start. In Chicago that’s about 42k a year.
The reason the numbers are all so skewed is that virtually all of the entry level work and grunt work has been outsourced to contractors. These contractors don’t count as federal employees, and don’t get counted when they do the numbers above.
This is a lot like taking the average of only entry level professionals on up in a private firm to figure out the average salary, while excluding all the data entry staff, secretaries, PA’s, file clerks, etc.
Feds still make less than their private sector counterparts doing the equivalent job, but they make up for it with job security and bennies. People should bother to do their research and understand their numbers before they start breaking out the pitchforks and torches.
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