Wages: Public vs Private

July 3rd, 2010 by Lee Eldridge

CongressIt’s time for a new topic. I was poking around online the other day, and found an article that peeked my curiosity. It’s always interesting when perception meets reality, and they look nothing alike.

Would you be surprised to learn that government employees make more money than their private sector counterparts? I was.

Perception: I don’t remember when or where, but I know that at some point in my life I was told that government employees (public sector) make less than people who work for businesses (private sector). And maybe at the time I was told, this was true. My perception had been that people chose to work for the government despite lower wages for the benefits and for job security.

Today’s Reality: According to the Bureau of Labor Statistics, the typical federal worker is paid 20% more than a private sector worker in the same occupation. Here are just a few examples:

A chemist on average makes $98,060 working for the federal government, and $72,120 in the private sector. A graphic designer makes $70,820 working for the feds, while making $46,565 in the business world. Did you know that we employ dry-cleaning workers in the federal government? They make $33,100, where they make only $19,945 working in the private sector. These figures are all from 2008.

On average, the typical federal worker makes $66,591 compared to their private sector counterparts, who make $55,500. That’s 20% more money in wages alone. According to the USA Today (see the full article here):

Federal. The federal pay premium cut across all job categories — white-collar, blue-collar, management, professional, technical and low-skill. In all, 180 jobs paid better average salaries in the federal government; 36 paid better in the private sector.

Private. The private sector paid more on average in a select group of high-skill occupations, including lawyers, veterinarians and airline pilots. The government’s 5,200 computer research scientists made an average of $95,190, about $10,000 less than the average in the corporate world.

State and local. State government employees had an average salary of $47,231 in 2008, about 5% less than comparable jobs in the private sector. City and county workers earned an average of $43,589, about 2% more than private workers in similar jobs. State and local workers have higher total compensation than private workers when the value of benefits is included.

Benefits: Now let’s look at benefits. According to the same USA Today article, “These salary figures do not include the value of health, pension and other benefits, which averaged $40,785 per federal employee in 2008 vs. $9,882 per private worker, according to the Bureau of Economic Analysis.”

That brings total compensation to $107,376 for federal employees and $65,382 for their private sector counterparts. That’s a difference of $41,994 per year.

I don’t bring any of this up to disparage government employees. They’re just people like you and me trying the best they can to provide for themselves and their families. If you were a dry-cleaning worker, why wouldn’t you take a job with the feds if it paid $13,155 more and provided MUCH better benefits?

My question is, why are the salaries so out of whack with wages and benefits in the private sector? Officials attempt to explain it that these jobs aren’t direct comparisons. Again from the USA Today article: “National Treasury Employees Union President Colleen Kelley says the comparison is faulty because it “compares apples and oranges.” Federal accountants, for example, perform work that has more complexity and requires more skill than accounting work in the private sector, she says.”

This is nothing more than union speak and misdirection. Do you believe that nurses working  for the Veterans Administration perform tasks that require more skills than their private sector counterparts? Yet on average, a nurse working for the VA makes $10,680 more than private sector nurses, plus the difference in benefits.

Conclusions: Simply put, government is inefficient and wasteful. Think of how much money we could save by paying government employees comparable salaries and benefits to their private sector counterparts. The government fails to understand simple economics. Supply and demand. They set wages and benefits artificially high. Why? I have a few theories, but they’ll have to wait for another day.

7 Responses to “Wages: Public vs Private”

  1. ralphie Says:

    Here’s my thoughts Lee –

    Of course you have to realize the govt DOESNT pay more for the same job in all cases. I personally have good friends in govt that dont make what their private sector counterparts make. But they also feel safer, and arent expected to kill themselves work wise.

    To be realistic, the public sector has to compete with the private sector for employees. Are the benefits better of working for the govt? Yes. More holiday days? Yes. More job security? Yes. Hopefully more good people will work for the state or feds and help our country. The same argument applies to paying teachers more and giving salaries to elected officials so more than just the rich can afford to run for office. If we want good govt, we need to invest in good people – just like a business.

    A public sector job is like a mutual fund whereas a private job is like buying a stock. Over a lifetime you might be better with that state job. If you want risk, go work for a private company in Lawrence.

    Corporate america has one motive – profit. When you cant acheive profit with fat margins or volume, you make it by cutting operations costs – ie – benefits.
    In recessionary times, you sometimes have no choice to cut benefits and wages. So its no wonder given our economy and the ruthless business ethic rampant in the US today, that state govt spends more on their people than private companies. In Europe everyone gets 6-8 weeks of paid vacation, paid. So it can be debated what is the value of workers and perhaps the Govt pays a fairer value for people that corporate america does?

    All that said, is govt wasteful. We all know it is. Your points are relevant.

  2. Julie A Says:

    Government is wasteful mostly because they are spending other people’s money. Governments never have to show a profit..or even positive results…and are notorious for creating societal problems, for which the solution to these problems is always more government!

    Spending other peoples’ money is fun, and so is the power that goes along with it. Its just like a drug addiction, and we’re gonna need a major intervention this fall

  3. Julie A Says:

    BTW i applied to the NASA Constallation program 2 or 3 years ago…the paperwork was so overwhelming, I almost gave up. A year later, I was informed that i didn’t get the job,.. Lol THat’s the only government job i ever applied for though..

  4. Bobby Says:

    I think it’s funny how liberals blame corporate greed for all of our problems. business is bad, and more government is good. that’s the liberal creed. the business world only exploits workers for personal gain. as if they don’t give millions and millions of dollars every year to charities across the nation, and across the world. but maybe ralphie can spin that somehow as beneficial to “profit”.

    government is inefficient and wasteful. they overpay gov’t workers because of unions and union indoctrination. they (liberal politicians) would love nothing more than to be the single provider of jobs and controller of all resources — after all, business is bad and government is good. then THEY can decide what’s fair for everybody.

  5. ralphie Says:

    Hey bobby – i didnt know the govt was unionized, thanks for giving me some of that red state – tea party style intel.

    Speaking as a progressive, liberal businessperson, you DONT understand a damn way we actually think. Your ideas about liberals are truly laughable and wild fantasies of the crazies in your tent.

  6. Bobby Says:

    Ralphie, what are you talking about? The gov’t is VERY unionized.

    Ever heard of AFGE (American Federation of Government Employees), NTEU (National Treasury Employee Union), APWU (American Postal Workers Union), AFSCME (Union of state, county and municipal employees), NALC (National Association of Letter Carriers), NFFE (National Federation of Federal Employees) not to mention the teachers unions and all the state government unions, such as California’s Service Employees International Union.

    Only 7.3 percent of all private sector employees are union members, while 37.6 percent of all government workers are unionized. Fifty-one percent of all union members are government workers.


    A good read from Cato:

  7. Lee Eldridge Says:

    Ralphie, Julie and Bobby bringing it strong. Thanks guys. I love the passion and insights. Been on vacation the last week, and will have very limited time the next couple of weeks — organizing two benefit concerts plus I’m behind at work.

    Wasn’t planning to get into the unions yet, but these numbers are similar to what I’ve seen — more than a third of government workers are in unions, and more than half of all union members are government employees. That’s several million government employees in unions. And if not for a handful of states that do not allow their government employees to unionize, the numbers would be higher. Unions hold a significant amount of power in Washington, and give a LOT of money to politicians (mostly on the left).

    The bigger long-term issue though are not that they unionize, but the negotiated pensions. States and the fed cumulatively are on the hook for billions. You think Social Security and Medicare are going to bankrupt this country? Wait till all the pensions start coming due. Huge financial liabilities on the books. Will hopefully have time to do a post with more info on this at a later date.

    And thanks again! Love the debate.