Public-sector compensation should be a model for the private sector—instead, it’s under attack

With a raised hand, my daughter’s teacher can magically line up 20 kindergarteners who are running circles around a loud gym. She’s at school when I drop my daughter off in the morning and still on the job—calling us and other parents from the subway—as my family sits down to dinner. She says she never wanted to do anything else in her life besides teach, and her enthusiasm is infectious: my daughter wants to be a teacher when she grows up.

I encourage my daughter’s aspirations, even though teachers are underpaid and their jobs are challenging, especially in today’s high-stakes testing environment. But teachers have good insurance if they get sick or become disabled, and they are able to enjoy their hard-earned retirements. Though they’re paid significantly less than other workers with bachelors’ or advanced degrees, they’re part of close-knit school communities where almost everyone from custodians to principals is paid a livable wage with good benefits.

Are public-sector workers overpaid? The custodians at my daughter’s school are better compensated than commercial office cleaners, especially non-union cleaners, but also shoulder more responsibility. No one wants transient or disaffected workers cleaning kids’ bathrooms or responsible for picking up broken glass on the playground. Their pay and benefits attract pillars of the community while ensuring that their families don’t depend on government safety net programs to get by. While companies like McDonald’s shift workers’ health costs onto Medicaid or rely on the Earned Income Tax Credit to supplement its workers’ wages, it makes no sense for government employers to do so.

My daughter’s teacher and principal, on the other hand, would be materially better off if they had chosen private-sector careers, even those with less generous benefits. Generally speaking, college-educated workers are compensated less and non-college-educated workers are compensated more in the public sector, so the public sector grows the middle class from both ends of the educational spectrum. The higher pay of non-college-educated workers and lower pay of college-educated workers roughly cancel each other out, but taxpayers still come out ahead after factoring in a compensation structure that reduces turnover and does not burden safety net programs.

In short, most public-sector jobs are secure middle-class jobs that attract educated workers willing to work for less in exchange for meaningful work and secure benefits. That is, these are good middle-class jobs unless conservative think-tanks and the billionaires who fund them have their way. Already, teachers’ pay has declined significantly relative to their private-sector peers and they and other public-sector workers’ benefits have been slashed, though you wouldn’t know this to read reports from the American Enterprise Institute, the Arnold Foundation, and countless others claiming that public-sector pay and benefits are hugely inflated.

Why go after teachers and other public-sector workers? As Jon Stewart hilariously pointed out, it’s an uphill battle to convince people that teachers are overpaid. But there seems to be unlimited funding for anyone willing to keep trying.

The American Enterprise Institute’s Andrew Biggs is the most dogged exemplar of this, presumably with the encouragement of the country’s soon-to-be billionaire education secretary, Betsy DeVos, who sits on AEI’s board. A few years ago, Biggs and a co-author from the Heritage Foundation received a lot of attention claiming that teachers were overpaid by 52 percent compared with private-sector workers. Though nobody in their right mind should have believed this whopper, Biggs and his coauthor’s Wall Street Journal op-ed may have convinced some readers that teachers might be at least a little overpaid when the opposite was in fact the case. The Journal and other media outlets promoted the study without noticing its numerous methodological flaws, most egregiously the authors’ failure to control for teachers’ higher levels of education.

More recently, Biggs took a different tack in comparing public-and private-sector pay in Connecticut—this time allowing for educational differences while selectively adding a long list of variables that had little or nothing to do with workers’ abilities but served to minimize the public-sector pay penalty. Oh, and Biggs dropped teachers from his pay sample entirely—as well as other public-sector workers who had relatively modest paychecks compared with their private-sector peers. (See EPI’s new report that shows that public sector workers in Connecticut are actually a bargain for taxpayers.)

One thing hasn’t changed: in both reports, Biggs inflates the present value of future pension benefits by basing it on low expected returns on Treasury bonds and other conservative investments rather than returns on actual pension fund assets. Biggs argues that projected pension benefits (and implicitly the salary growth assumptions on which these projections are based) are quasi-guaranteed and therefore should be valued based on guaranteed investments, an argument belied by recent history as public-sector jobs and pensions were slashed in the wake of the financial crisis and Great Recession.

Biggs’s focus on workers’ pensions isn’t accidental. Connecticut has among the most underfunded pensions in the country, as lawmakers for years neglected pension contributions in order to maintain public services (including some of the country’s best schools as well as some of the worst)—without raising taxes significantly on wealthy residents and corporations. Billionaires and small-government ideologues want to ensure that these legacy costs are borne by workers, not taxpayers, and investing in misleading research can pay dividends, especially as Connecticut is taking steps to ensure that the wealthy start paying their fair share.

  • con?lib?

    As a former public sector worker, I lived on lower wages for a number of years because the story was that we would receive a stable pension to compensate for the difference. It didn’t quite work out that way, since the legislature would cut pension benefits at nearly every opportunity they had to do so. I suppose we were supposed to work for chickenfeed because we were in the public sector.

  • Sean Meehan

    The difference between public and private sector priorities is that ethical behavior is expected (and generally enforced) in one and not the other. Crime (and other selfish behavior) pays in one arena, and is now attempting to monopolize all arenas.