Public Sector Benefits

A common justification for the exorbitant pension and benefit plans public workers get is that these employees are relatively underpaid during their working careers (and thus they have to make up for it during retirement). This article disputes this notion:

In defending the pensions, supporters say public workers, especially professionals in high-paying fields such as lawyers, doctors and engineers, earn less than private employees in exchange for better job security and benefits. Most also will not get Social Security, having not paid into the federal plan.

"City employees give up a lot to work for the city," said former Cincinnati Safety Director William Gustavson, an attorney who represents retirees watching City Council as it considers possible changes to pension and health benefits. "Being able to count on a good pension and benefits is part of the trade off."

U.S. Bureau of Labor Statistics data contradict that argument, showing that local and state workers earn an average of $25.30 an hour, 33 percent more than the private sector's $19. Among professionals such as lawyers and teachers, public-sector hourly salaries averaged $31.51, almost identical to the private sector's $31.75, according to BLS figures for 2007. Blue-collar public employees easily out-earn private workers, averaging $16.72 per hour compared to $9.87.

A 2008 study by the Employee Benefit Research Institute, a nonpartisan Washington study group, found that including wages and benefits, total compensation costs for local and state workers were 51 percent higher than those of private employees.

If we added studies of government worker productivity to this, I bet that public workers get paid more than double what private workers do on an output basis.

Economically, it stands to reason that government can only over-pay for its workers: if they offer less than market rates, they’ll have no employees, since candidates will go elsewhere. And because there’s no market mechanism to make governments care about their costs (i.e. governments don’t work for a profit) there’s no constraint on how much they’ll spend. So the easy way to get employees is to offer (way) above-market rates to its employees, with the taxpayer footing the bill. And according to this article, that’s exactly what governments do. (Guess how this plays out with all the “stimulus” spending government is doing in your name?)

But although the outcome was predictable by economic arguments, the real question is, why is government engaged in most of its activities anyways? (I.e. why is it doing anything beyond maintaining the peace via the police, courts and armed services?) That question is fundamentally a moral one, because to answer it, one first has to answer the question “what is good for man?”. Objectivism answers that the good is that which permits each individual man to survive, viz. the free use of his rational mind. The political organization of society follows from there, including the very limited role of government. Were we to adopt these ideas, there would be no issue of determining the pay of most current public workers — they'd be part of the private sector and thus would have to prove their worth on a market just as do most of us.