How earnings for unionized public employees compare with private sector
In the fight for balanced budgets vs. benefits for public employees, what's fair and what's politics?
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In New York City, it's not so much the wages as the benefits, says Stephen Goldsmith, deputy mayor for operations. "Our fringe benefits can come to 100 percent of pay," says Mr. Goldsmith, who is a former mayor of Indianapolis.Skip to next paragraph
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He also notes, "One of the things we're dealing with here is [that] the definition of compensation is too narrow: The city sets the pay, and the state sets the pension."
But these are the exceptions, say some studies, which find that public employees are paid less.
Last summer, Jeffrey Keefe, an associate professor in labor and employment relations at Rutgers University in New Brunswick, N.J., looked at the compensation for public servants on a national basis, using data from the Bureau of Labor Statistics. After accounting for factors such as education, gender, and hours of work, he concluded that civil servants are not overpaid and in many cases make below the wages earned by their counterparts in the private sector.
"Where there is collective bargaining, they are close to the market in terms of wages," he says. "But in areas where there is no collective bargaining, like in the South and Southwest, people are paid less than the market."
In Wisconsin, currently ground zero for these issues, public employees are paid less than the private sector, says Ethan Pollack of the Economic Policy Institute, a nonpartisan but left-leaning think tank. Public workers in the Badger State with a bachelor's degree or more – which make up 60 percent of the state workforce – are compensated between $20,000 less and $82,000 less than the private sector, Mr. Pollack writes in a recent report.
Nevertheless, cash-strapped states and cities are finding it fairly compelling to take a hard look at total employee remuneration as they try to plug budget gaps. In Wisconsin, for instance, Gov. Scott Walker (R) is trying to patch up a $137 million hole in the current budget and a $3.6 billion shortfall that's projected for fiscal year 2012, which begins in July. Worker concessions, he says, will save the state $30 million this fiscal year alone. One of his proposals: Employees will increase their contribution to their health-care fund from 5 percent to 12 percent.
Pension benefits – another big problem in Wisconsin – are eating into the budgets of many other states, as well as of cities.
Take Atlanta. The city will spend about $556 million from its general fund, which pays for most city operations except water, sewer, and sanitation. However, 28 percent of that budget, or $150 million, is earmarked as both required and catch-up contributions to the pension fund. So more than 63 percent of the city's budget goes toward employee salaries and benefits.
"It has been stated around town, and I have stated it: This is just not sustainable to make that kind of pension contribution every year," says Michael Bell, chief financial officer of Atlanta in the early 1990s.
On top of this, cities and states, along with the private sector, are facing another big reality: Baby boomers are in the process of retiring. "As the baby boomers retire, the cities are going to have huge costs," says Goldsmith. "It requires public officials to be much more alert."