A common theme among those who favor changes in state employee compensation is that these workers are overpaid and their pension benefits too generous. A little perspective is in order.
A recent study found that public sector jobs require more education, but pay less than those in the private sector. The study was commissioned by the Center for State & Local Government Excellence and the National Institute on Retirement Security, so critics will argue that it is biased in favor of government jobs. That would be unfortunate, since it provides valuable data, rather than just anecdotes.
The report, which analyzed data from the U.S. Bureau of Labor Statistics, found that state workers earn an average of 11 percent less than their private sector counterparts. The gap has widened over the last 20 years. This, despite the fact that 48 percent of employees in the public sector hold college degrees, compared with 23 percent in the private sector.
Government pensions have been a focus of cuts — and anger — in Maine and other states. Such benefits typically make up a larger share of compensation for public employees than they do for those in the private sector.
Still, total compensation is nearly 7 percent lower for state employees than comparable private sector workers, according to the study.
David Cay Johnston, who won the Pulitzer Prize for his reporting on tax loopholes and inequities for The New York Times, writes in a recent online column that the conversation about government employees contributions to pension systems is skewed by a fundamental misunderstanding. “The ‘contributions’ consist of money that employees chose to take as deferred wages — as pensions when they retire — rather than take immediately in cash,” he wrote on the Tax.com website.
In other words, public sector employees often accept lower wages in exchange for other compensation, such as pension contributions and health benefits. When those benefits are later reduced, this compounds the inequity between public and private employees.
Further, it must be remembered that in Maine, employees who become vested in the state’s pension system forgo Social Security benefits, even if they’ve worked in the private sector. The state’s contribution to the retirement system is 5.5 percent of an employee’s salary. If the state paid into Social Security instead, the state’s share would be 6.2 percent.
This flies in the face of the “lavish” benefits decried by Tarren Bragdon, the head of The Maine Heritage Policy Center, a think tank with eight employees, who makes nearly twice what the governor does.
Certainly, Gov. Paul LePage is right that the state should reconsider its benefits and pension packages, especially in light of depressed state revenues. Raising the retirement age, especially when young people added to the payroll are expected to live much longer than current retirees, makes sense. Increasing employee payments for health insurance probably does, too.
But these discussions must happen in light of reality, not preconceived notions that state employees are paid too much or are greedy.