Once upon a time, public employees made less than private sector workers but were compensated more generously on their pensions to make up the difference. The pension was intended as an incentive to stay on the public payroll as a career, thus insuring a stable workforce able to keep essential daily government services functioning regardless of changes in political leadership.
That was a reasonable model in the decades after passage of the Pendleton Civil Service Act, which in 1883 replaced the old spoils system with a merit-based professional work force. For years thereafter, career government employees accepted lower salaries but received defined-benefit pensions under the Civil Service Retirement System (CSRS).
But beginning in the 1960s, Congress made federal civil service salaries and health care benefits comparable to private sector workers. At the same time, CSRS benefits became ever more generous, even to the point of awarding multiple cost-of-living adjustments within a year.
By 1984, CSRS was replaced with the Federal Employees Retirement System, a defined contribution plan that covered all subsequent new hires. But federal compensation kept growing and government employees’ advantage over the private sector steadily grew. That was even more so the case at the state and local level, where public employee unions kept the pressure on for raising salaries and benefits, regardless of taxpayers’ ability to support such expenditures.
The result is evident today in New Jersey, Wisconsin, New York, Indiana, Ohio and other states where governors and legislators are demanding givebacks from public employee unions to help overcome massive budget deficits and the unreasonably generous compensation programs driving their exploding public debts.
In response, union leaders trot out the old idea that public employees are paid less than private sector workers. To bolster that claim, many union leaders — and their allies in the liberal precincts of the mainstream media — have cited a study by the Economic Policy Institute (EPI), a labor-backed think tank. The EPI study claimed public employees are, on average, paid 4 percent less nationally than their private sector counterparts.
Now along comes the Center for Union Facts (CFU), a business-backed think tank, making a compelling case that the EPI study is fundamentally flawed and that public employees actually enjoy a compensation premium of at least 5 percent. The EPI flaws are, first, the exclusion of thousands of public employees, such as teachers, who work only part of the year but who receive full-time compensation, and second, only comparing public employee jobs with positions at the highest-paying corporations, thus excluding millions of private sector workers in medium-size and small businesses, as well as self-employed, often home-based individuals.
The 5 percent premium is likely a conservative estimate, according to the CFU, because “public sector workers enjoy substantially greater job security than their private sector counterparts; their layoff and discharge rate as a percent of total employment is over three times lower than the private sector as a whole.”
Here’s something else to remember: Private sector workers also must pay the taxes that fund government workers’ paychecks. Taxpayers are tired of paying the freight for tax consumers.