State and local workers have not seen their wages and compensation (including all benefits) grow any faster than that of private-sector workers. According to the data, the wages of state and local employees grew 0.6% annually from 1990 to 2010 (after adjusting for inflation), which was actually slightly slower than the 0.7% rate for private-sector workers.1 Both groups saw their inflation-adjusted hourly compensation grow at an identical 0.9% annual rate. Claims that state and local workers make exorbitant wages and compensation almost always fail to consider the occupation or education levels of the workers being compared. Studies which make an apple-to-apple comparison (controlling for education and other worker characteristics) show that state and local workers are not overpaid.
• Heywood and Bender (2010) find that “• Wages and salaries of state and local employees are lower than those for private-sector workers with comparable earnings determinants (e.g., education). State employees typically earn 11% less; local workers earn 12% less.” Heywood and Bender also find that “State and local employees have lower total compensation than their private sector counterparts. On average, total compensation is 6.8% lower for state employees and 7.4% lower for local workers, compared with comparable private sector employees.”
• Keefe (2011) finds that “On average, full-time state and local employees are undercompensated by 3.7%, in comparison to otherwise similar private-sector workers. The public employee compensation penalty is smaller for local government employees (1.8%) than state government workers (7.6%).”
• Schmitt (2010) finds that “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% less, on average, than their private-sector counterparts. For women workers, the publicsector penalty is about 2% of earnings; for men, it is about 6% of earnings.”