Saturday, August 3, 2013

Putting myths to rest one more time.

The people who don't like public employees and/or their unions are having a field day. Detroit's bankruptcy filing has given them the opportunity to dust off the tired old "everybody knows" myths about public employees and their unions.

We addressed these myths in early 2012 with a six-part series called "Let's lay this myths to rest once and for all." If you're unfortunate to have a family member or friend who still believes these myths, here's a quick refresher course:

MYTH: Public employees are paid more than employees in the private sector.

TRUTH: The average public employee IS paid more than the average private-sector employee. This ignores, however, the fact that this involves an "apples to oranges" comparison. The "basket" of public employees contains many more employees with college educations, including many with graduate degrees. In fact, the average public employee is more than twice as likely to have a college or advanced degree. If you believe that more education should lead to better pay, you should have no problem with better-educated employees being paid more. The research-based conclusion is that "Wages and salaries of state and local employees are lower than those of private sector workers with comparable earnings determinants (e.g., education). State employees typically earn 11% less; local workers earn 12% less." For details see:

1) Let's lay this myth to rest once and for all.
2) Part 2: Let's lay this myth to rest once and for all.

MYTH: Pubic sector benefits are excessive compared with those in the private sector.

TRUTH: Pundits have told us time and again that excessive pension benefits have brought Detroit to its knees. The average police/firefighter pension is $36,000 for Detroit retirees. The average for other city employees is $19,000. These hardly seem excessive! Taking the country as a whole, we find that " benefits as a share of total compensation across the entire private sector amounted to 29.15%. In large private firms (100+ employees), benefits were 31.42% of total compensation. The figure for local and state governments is 32.65%, hardly a dramatic difference!"

The research-based conclusion is that " When comparing total compensation [wages plus benefits] state workers are behind their private sector counterparts by 6.8%, while local government workers trail by 7.4%. If you compare them with just the large firms in the private sector sample, state workers trail their private counterparts by 10.4% with local workers trailing by 9.8%." For more details see "Part 4: Let's lay this myth to rest once and for all."

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

"The large state deficits have frequently been blamed on a growing public sector. For example, Governor Scott Walker warned that Wisconsin 'cannot grow if our people are weighed down paying for a larger and larger government.' However, the size of the public sector has not grown in recent years, neither in terms of public sector employment levels nor public sector compensation."

"Let's look at the numbers. "State and local government workers as a share of the workforce has been relatively steady since 1979....Overall, the share of workers in state and local employment averaged 14.2 percent over the thirty year period and ranged from a low of 13.6 percent at the height of the boom in 1999 to a high of 15.2 percent in the great recession in 2009 reflecting the greater loss in private sector employment—over 5 million private sector jobs were lost that year.  By midway through 2011, the share of workers employed by state and local governments had fallen back to 14.6 percent."

"Not only has the share of state and local government jobs remained relatively steady as a percentage of all jobs, but state and local government employment per thousand residents has also remained steady....In 1990, the United States as a whole had an average of 17.2 state workers per thousand residents. In 2009, there were 16.8."

"Might union states be different? New York Times columnist David Brooks argued, “public sector unions can use political power to increase demand for their product.” If he is correct, we should expect states with high public sector union density—the share of public sector workers in a union—to have more public sector workers per thousand residents, than states with lower public sector union density. In order to test this hypothesis, we examine the ten states with the highest share of public employees in unions and the ten states with the lowest share of public employees in unions. .. the lowest union density states averaged 69.1 state and local employees per thousand residents in 1990 and 74.6 in 2009. The highest union density states averaged 65.1 state and local employees per thousand residents in 1990 and 68.3 in 2009. The number of state and local employees per thousand actually fell in the high union density states between 2001 and 2009....No correlation was found between public sector union density and the level of public sector employment in a state. Contrary to Brooks' assertion, there is no evidence that public sector unionization has resulted in a growth of the public sector workforce.

"Not only has the number of public sector workers per thousand residents remained steady, but public sector compensation as a share of state budget has actually declined....The share of state spending that went towards compensation fell steadily between 1992 and 2002 and remained stable from 2002 to 2009."

"The average share of the budget spent on compensation over the time period for the ten most highly unionized states was 19.6%, compared to 18.7% for the ten least unionized states. By 2009, that gap between the two groups had narrowed to 0.5% (19.8 vs 19.3 percent)...Budget deficits were not caused by an increase in funding going to compensation for public sector workers."