Reports from the Economic Front

a blog by Marty Hart-Landsberg

Public Sector Myths

There is a growing attack on the public sector—its programs and its workers.  This is rather odd given the continuing weakness in the economy and our country’s enormous unmet social needs.  Even the situation in Greece is being manipulated to promote fiscal belt tightening in the United States.

It is true that state and local governments are struggling with deep deficits that cannot easily be financed.  Although these are largely the result of massive tax cuts on the wealthy, an explosion of inequality, and worsening economic trends (highlighted by the Great Recession), the media has generally focused attention on the need to cut programs and slash the number and pay of public sector workers.

Tragically, many private sector workers have been won over to the side of those who want to shrink government programs by their claims that public sector workers are pampered and overpaid.  This gets into a twisted logic, where one group of workers are being encouraged to undermine the gains of another group—generating not economic strength but a downward spiral in living and working conditions for the great majority.

However, leaving strategic considerations aside, the reality is that public sector workers are actually underpaid relative to their private sector peers.  It is true that on average, state and local government workers earn more than private sector workers.  But this is not a relevant comparison.  The reason is that the age, educational background, and gender of the two groups are not the same.

As a recent report by John Schmidt of the Center for Economic and Policy Research explains:

on average, state and local workers are . . . older and substantially better educated than private sector workers. Half of state and local employees have a four-year college degree or more, and almost one-fourth have an advanced degree. Less than 30 percent of private-sector workers have a four-year college degree, and less than 10 percent have an advanced degree. The typical state and local worker is also about four years older than the typical private-sector worker.

Sixty percent of state and local government employees are women, compared to 46 percent of employees in the private sector.

When state and local government employees are compared to private-sector workers with similar characteristics – particularly when workers are matched by age and education – state and local workers actually earn 4 percent less, on average, than their private-sector counterparts. For women workers, the public-sector penalty is about 2 percent of earnings; for men, it is about 6 percent of earnings.

The wage penalty for working in the state-and-local sector is particularly large for higher-wage workers. While low-wage workers receive a small wage premium in state-and-local jobs (about 6 percent for a typical low-wage worker), the typical middle-wage worker earns about 4 percent less in state-and-local work, and the typical high-wage worker makes about 11 percent less than a similar private-sector worker.

The Center for Economic and Policy Research report is based on data from 2009.  Another report, “Out of Balance? Comparing Public and Private Sector Compensation Over 20 Years,” which was commissioned by the Center for State and Local Government Excellence and the National Institute on Retirement Security, comes to the same general conclusion looking at trends over a longer period.

It is time for a spirited campaign that links public and private sector workers together around demands that actually defend worker interests.

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