The Public/Private Compensation Gap

High salaries in some government agencies in Louisiana have been in the news lately as the state prepares to deal with a massive budget shortfall next spring. The whole issue of public sector versus private compensation and employment levels will be on the front burner as government revenues shrink and deficits mount.

A recent analysis by USA TODAY definitely caught the attention of taxpayers. The August 13 article noted that while private sector employees’ compensation was becoming stagnant, federal employees’ compensation levels were soaring. According to the article, for nine consecutive years, federal worker total compensation was higher than private sector wages and benefits.

The numbers are eye-popping. According to the most recent data from the Bureau of Economic Analysis, federal workers earned an average total compensation package of $123,049 in 2009 while private sector employees earned less than half that amount—$61,051. In average pay, the federal employees enjoy a 60 percent advantage over their private sector counterparts. In benefits, they enjoy a whopping 80 percent. The two elements combine for a 100 percent advantage. That is absurd! Does anyone think that federal employees are 100 percent more productive than private sector workers?

State and local government employees also enjoy a compensation advantage over those in the private sector, but the gap is not as large as with federal workers. Total compensation for the state and local government employees averages $69,913 compared to the $61,051 in the private arena—a 7 percent advantage. The two salary levels are within 3 percent of each other, but the state and local government employees enjoy a 23 percent advantage in the benefit portion of the total compensation packages.

Private sector workers and state and local government employees have something in common: they are both paying excessively for the exorbitant compensation levels of their federal brethren.

Bringing federal compensation levels in line with reality will be an arduous process. The federal employee unions are powerful and strong players in elections. That clout gives them undue influence in salary negotiations as well as in policy formation in the White House and the halls of Congress. They take full advantage of that leverage. A prime example is the federal “stimulus” legislation that passed last year. The $800 billion package was tilted heavily toward maintaining public sector jobs instead of bringing back jobs in the private sector. The “Stimulus II” package under consideration in Congress is more of the same. No wonder the folks who actually have to pay for this largesse are up in arms and pointing toward the November 2 elections with a vengeance.

At the state level here in Louisiana, the cost to the state for keeping its bloated levels of public employees will be an issue when the budget debate begins next spring. Louisiana has far more state employees than the southern state average, yet it is taboo among many in the Legislature to even suggest that those rolls be trimmed. But the time has come to do it. The current budget is propped up by $2.8 billion in one-time funds that won’t be available to keep the high spending levels intact. According to some estimates, $600 million a year could be saved by bringing state employee levels to the southern average. If not now, when?

No one doubts that there are many excellent public sector employees who provide valuable services to the public. But no one can look at the data from the Bureau of Economic Analysis and argue that the public sector employees deserve to be compensated at levels far above their private sector counterparts. Logic and fairness call for that imbalance to be rectified.



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