Part 3: Let's lay this myth to rest once and for all!

To review: This all began when a local WNY paper opined that labor costs in the public sector were "out of whack" with the private sector. (Click here to see the related blog post.) No support was given for this claim, they were just making the argument based on the idea that "everyone knows" this to be the case.

In the next post, Let's lay this myth to rest once and for all, we identified three "everybody knows" statements which are demonstrably false:

1. Public sector compensation is out of line with that in the private sector.

2. Public sector pay and benefits are the major cause of the financial difficulties being visited upon the states.

3. Public sector unions, through their political influence, are exacerbating state and local financial problems.

In Part 2: Let's lay this myth to rest once and for all, we looked at research done by experts in the field who concluded that public sector compensation is in line with that in the private sector. In fact, when considering wages plus benefits, comparable public sector workers were, if anything,  more poorly compensated than private sector workers. Now we look inside the study.

Heywood and Bender point out that "...the characteristics of state and local government employees differ dramatically from those of the private sector. State and local governments consist disproportionately of occupations that demand more skills and earn higher wages. As a consequence, the typical state or local government employee has substantially more education, training and experience. Adjusting for these differences is required to compare apples to apples. Indeed, adjusting for these differences typically explains most of the observed earnings advantage of the typical state and local worker....State and local government workers across the country are more than twice as likely to have at least bachelor's degrees. Thus, the fact that public sector workers receive greater average compensation than private sector workers should be no more surprising than the fact that those with more skills and education earn more." [Emphasis mine.]

The researchers go on to look at the public vs private pay differentials once corrections are made for education, training and experience. Here is their summary for the years 2000-2008.

Average Public-Private Wage Differentials, 2000-2008
	State-Private (%)	Local-Private (%)
Full Country	-11.4	-12.0
California	-9.8	-6.1
Texas	-16.6	-17.6
New York	-7.0	-5.9
Pennsylvania	-4.5	-12.9
Illinois	-12.5	-13.3
Michigan	-10.1	-11.2
Florida	-4.8	-0.2

They conclude that, over this time period, "State workers earn 11% less and local workers 12% less than private sector workers." Notice that the wages for NY workers are 6-7% below those for comparable private sector workers for this period.

But wait, "everybody knows" that it's really the benefits of public sector workers that are really "out of whack" with those in the private sector. Maybe public sector wages are lower, but the obscene benefits will more than make up for the lower wages.

Think so? Benefits will be the subject of the next post.