printAre Federal Workers Overpaid? asks Professor Nancy Folbre of Economix at the New York Times. Unfortunately, Ms. Folbre answers unsatisfactorily. However, she does cite me in her New-York Times’ Economix blog.
New York Times
Are Federal Workers Overpaid?
Nancy Folbre – 9 hours ago
“…They were dramatized by Ilana Mercer in World Net Daily in a feature entitled “Life in the Oink Sector” and echoed by the conservative columnist Jeff Jacoby” …
October 13, 2009, 7:11 am
Are Federal Workers Overpaid?
By Nancy Folbre
Today’s Economist
Nancy Folbre is an economics professor at the University of Massachusetts, Amherst.
It’s bad enough that the average federal worker is paid more than the average private-sector worker, especially taking into account the value of benefits like health insurance and pensions. But what’s really shocking is that the gulf between the total compensation (wages plus benefits) enjoyed by federal workers and private-sector workers has increased since 1990.
So argues Chris Edwards, the tax director at the Cato Institute, a libertarian research organization.
Similar arguments were featured in a full-page ad sponsored by The Free Enterprise Nation in The Wall Street Journal on Sept. 22.
They were dramatized by Ilana Mercer in World Net Daily in a feature entitled “Life in the Oink Sector” and echoed by the conservative columnist Jeff Jacoby in The Boston Globe.
None of the sources provided any details about the characteristics of federal workers or their jobs. But such details (easily extracted from the regular Current Population Survey) explain why federal workers are paid more and why their average compensation has risen higher. They also show that federal employment creates proportionately far more middle-class jobs than the private sector.
In 2008, only 14 percent of federal workers were on part-time schedules, compared to 26 percent in the private sector. Federal workers were far older on average: 55 percent were between the ages of 45 and 64, compared to 36 percent of private-sector workers. Furthermore, 45 percent of federal workers held a college degree or higher educational credential, compared to 29 percent of private-sector workers.
Federal workers are more likely to receive employer-paid health benefits than private sector workers — 77 percent compared to 56 percent. This is one reason our highest-paid federal employee, the president of the United States, is fighting for universal health insurance coverage.
Federal workers are also more likely than private sector workers to garner pension benefits (81 percent compared to 53 percent). Keep in mind, however, that for some federal employees, pension benefits come in lieu of Social Security payments.
Both health insurance and pension benefits are more expensive for older than for younger workers, and health insurance costs, in particular, have escalated rapidly since 1990. Also, age and educational attainment differences have widened considerably since 1991, when 20 percent of private sector and 31 percent of federal workers had a college degree or higher.
The biggest difference between private and federal employment, illustrated in the graph above, lies in the proportion of jobs paying less than $25,000 a year. In 2008 more than 43 percent of private-sector workers earned less than $25,000 a year. Most federal employees fell squarely in the middle earnings brackets, making $25,000 to $75,000 a year.
A larger share of federal than private-sector workers earned $75,000 to $150,000 a year. Beyond that level, private employees were overrepresented. The percentage earning more than $250,000 in 2008 (not shown in the graph above) was twice as high as the percentage of federal employees (1 percent compared to 0.5 percent).
In order to protect the confidentiality of its respondents, the Current Population Survey assigns all extremely high levels of earnings the same value or “topcode.” As a result, it’s impossible to accurately compare all private sector and federal workers in the long right-hand tail of the earnings distribution
But not all earnings are confidential. We, know, for instance, that the president of the United States earned $400,000 in 2008. He also enjoyed a $50,000 annual expense account and rent-free accomodations for himself and his family at the White House.
By comparison, the compensation of the chief executive officers of the 500 biggest companies of the United States in 2008 came out to an average of $11.4 million each.
Consistent with the overall picture described above, statistical analysis of the impact of individual education and experience on earnings in the United States by the Harvard economist George Borjas showed that federal employees are paid considerably less than comparable private workers at the top end.
As the conservative columnist Ross Douthat points out, earnings inequality is generally lower in public-sector employment, and countries with a larger public sector therefore experience less overall income inequality.
Some oinking can definitely be heard out there in the labor market, but anyone willing to follow the numbers can tell that the biggest piggies are not those employed by the federal government.
Glad that you got a reference.
The salary differential (not counting benefits) is somewhat understandable since there are not too many “federal employee” waiters, grocery baggers, janitors (much of that has been privatized), gardeners, etc. compared to the private sector. The fed sector is full of college-degreed “middle managers” ranging from contract officers to meat inspectors to researchers and (of course) lawyers.
The big difference with the corresponding private sector (to the extent that there still really IS a private sector in America) comes in job tenure, pensions, and health care – all in favor of the government. With cops, firemen, and teachers retiring in their 40’s or 50’s, it is somewhat ridiculous.
I would bet government backed cartels account for quite a bit of wage discrepancy:
Doctors and lawyers come to mind, bankers most certainly. The US is a nation of looters via government backed cartels.
There’s a cartel for US,
somewhere a cartel for US.
Money, security, and corporate welfare
wait for US somewhere. apologies to “There’s a place for us” from the West Side Story
My cartel? I am retired but formerly lived off the Space Cartel (NASA). I never voted for anyone based on how it would feather my nest though.
Bravo !!!!!!!!!!!!!!!!!!!!!!!
Pretty soon your writing will be in such demand, you will not have time for us little people, LOL.
Yes, congrats Ilana.
Mish Shedlock was cited by Paul Krugman.
I have good taste in bloggers, it seems.
“Some oinking can definitely be heard out there in the labor market, but anyone willing to follow the numbers can tell that the biggest piggies are not those employed by the federal government.” Say what! I was a probation and parole officer for the state of Oklahoma for twenty-two years for a base salary of less than thirty K a year, a three year Federal Probation officer earned double that and I don’t know what they made if they stayed over three years. I’m not complaining, but just comparing jobs, apples to apples. Like Mr. Bleckert, I’m glad that you’re getting noticed and they can spell your name right. Keep it up.
Nancy Folbre is operating off some interesting premises. First, the government doesn’t “create” jobs. Secondly, we are supposed to believe that those individuals who head large companies are not performing as important a job as the President. Thirdly, those “extremely” high paid CEO’s are not taxing people to obtain their incomes. So I’m left with wondering how “oinking” is applied to the private sector. And then there’s the ever-present playing of the “inequality” card regarding incomes. And so we’re supposed to gasp in horror at the unfair gulf between CEO and government employee salaries.
To Vic Jones – sadly, in this “mixed” economy, it is difficult to find the “PRIVATE sector” outside of Chinese restaurants, Silicon valley, and my nephew’s bookstore. Richard Blum’s CEO pay for Perini, a defense contractor, is due to the largess he gets partially as the spouse of Senator Diane Feinstein. Auto dealerships are a government ordered cartel. The medical and legal professions are basically government-licensed guilds often billing customers for governmentally required “paperwork”. Agribusiness is part of the oink sector.
The security and defense sectors are basically neo-governmental with ex-Generals securing money from their former underling Colonels. Universities – even the so-called “private” ones – are basically governmentally funded institutions. Banks? – don’t make me laugh! The tentacles of the beast are deep.
Whole Food’s CEO John Mackey (ironically, a libertarian who is against governmental health care and also says that CEO’s are overpaid) is NOT taxing us for his $ 1 salary – unless we shop at his store. But Robert Stevens’ $ 26.5 million compensation (Lockheed Martin) was paid for by selling F-22’s to the TAXPAYERS – and his salary is paid by Vic, Ilana, and myself whether we want to or not. OINK!