Public Sector Compensation Part 2

“It is difficult to get a man to understand something when his salary depends on his not understanding it.” – Upton Sinclair

I explained in the Public Sector Compensation Part 1 and Part 1.5 posts that public sector employees are actually paid less than private sector workers when adjusting for such factors as education, type of work, and experience.  Yet, many perceptions and editorials hold contrary opinions.  In this post, I look at The Trouble with Public Sector Unions by Professor Daniel DiSalvo of the City College of New York.  This article is featured because it was cited by columnist David Brooks in the New York Times. The article itself features in part New Jersey Governor Chris Christie, who just became even more famous through 60 Minutes piece entitled Day of Reckoning.

DiSalvo laments that public employee pay average a reported $14 per hour more than that private workers.  Yet, he affirms many of the points raised in previous studies. For example, he says. Generally speaking, the public sector pays more than the private sector for jobs at the low end of the labor market, while the private sector pays more for jobs at the high end. Further, aggregate pay differentials stem party from the fact that government work tends to be more white-collar, and that public employees tend to be better educated and more experienced, and to live in urban areas.  So, DiSalvo explains exactly the variances between public sector and private sector pay, yet he concludes that public employees are overcompensated.

As the title suggests, DiSalvo saves his largest criticisms for a more specific group of public employees: unionized public workers. Public sector unions, he writes, are incompatible with the spirit of democracy.  The membership numbers of these unions now outnumber their private sector counterparts.  Some of DiSalvo’s criticisms toward unions are warranted, and some are overblown.  For example, he asserts that public employees can hold hostage vital public services by potential strikes and other forms of collective bargaining protections.  He also states, without documentation, that unlike in the private sector, contract negotiations in the public sector are usually not highly adversarial.  First, public safety employees, such as police and fire, cannot legally strike in most states.  Second, DiSalvo obviously has not witnessed many public labor negotiations if he believes that public sector negotiations are not contentious (although everything, I suppose, is relative).

Nonetheless, there legitimate areas that DiSalvo misses that place management in positions of disadvantage.  For example, public safety employees can demand binding arbitration.  And, mediators like to split the baby in wage disputes rather than to examine current wages and market conditions.  This incentivizes unions to begin their negotiating positions with unrealistic demands. In Minnesota specifically, school districts are fined if labor contracts are not settled by specific dates. Who holds the cards in that scenario? And, governments especially at the state level should address real issues regarding public pension funding and benefit levels, including the ability for some employees “ especially in public safety “to retire well before the age of 60.

DiSalvo reveals his personal bias on several occasions. For example, he says that taxpayers are rewarded with larger and more expensive, yet less effective government. He does not state the standard by which he measures “less effective government.  Further, he references USA Today as the source for quoting a wage statistic.  Surely, a college professor can find a more scholarly source.  Finally, he states without equivocation or qualification that With poor prospects in the ultra-competitive private sector, government work is increasingly desirable for those with limited skills and civil service rules make government less attractive to those whose abilities are in high demand.  Not only does DiSalvo generalize without evidence, he ignores several studies that indicate that younger professionals especially are attracted to public service today in spite of, not because of, the pay.

The late Daniel Patrick Moynihan said that “Everyone is entitled to his own opinion, but not his own facts.” The most fascinating aspect of DiSalvo’s piece relative to the previously-cited study by the Center for Excellence in State and Local Government is that they largely agree on the facts.  Yet, they reach almost diametrically opposite conclusions. How can they agree and disagree at the same time? That is how we enter the world of politics, which will be the subject of subsequent posts on this topic.

Related Blog Posts

Public Sector Compensation, Part 1

Public Sector Compensation, Part 1.5

Referenced Articles/Studies

Out of Balance, Comparing Public and Private Sector over 20 Years, Keith A Bender et al, Center for State and Local Government Excellence

The Paralysis of the State, David Brooks, New York Times

The Trouble with Public Sector Unions, Prof. Daniel DiSalvo

Minnesota Public Sector Compensation, Minnesota Tax Payers Association (commissioned by Minnesota Chamber of Commerce)

Government Unions vs. Taxpayers, Governor Tim Pawlenty (R –Minnesota)

Governor’s rants about public employees don’t stand up to scrutiny, Jim Miller, League of Minnesota Cities Executive Director

Spin Meter: Lawmakers call for pay freeze after years of increases in their own staff salaries, Associated Press

Are Public Employees Pampered? MPR Insight Now Forum

Are Federal Workers Over Paid, Fact Check web site