Over the past few days tens of thousands of unions workers and their families have protested Governor Scott Walker’s (R-WI) plan to strip public employee unions of their collective bargaining rights and effectively reduce their pay. The bill is currently stalled in Wisconsin’s Senate, as State Senators physically left the state to prevent the quorum needed to take the vote. At the heart of the debate is the pay and benefits of public employees. Walker also claims that public employees make more than private workers, and pay less for their health care plans. Unions argue their benefits were hard earned, and that on average they earn no more than their private employee counterparts. So who is right?
Like almost everything, the answer depends on how one phrases the question. Public employees do, on average, make more than private employees. In 2010 the average public worker made about 25% more than the average private worker. However, some say the better analysis would be comparing an average public employee with a college education to a private employee with a college education. An accountant makes more money, on average, than a fast food worker because he or she has more education and the accountant’s skills are more in demand. Similarly, on average a public employee has more education than their private employee counterpart, and also has skills which are more in demand.
When comparing workers with a similar education and other charecteristics, one study found that, on average, state and local workers actually made about 10% less than their public employee counterparts. That study included the value of worker benefits in their analysis. Antidotal stories confirm this analysis in various fields. A quality lawyer with a great deal of experience could easily make over $300,000 as a partner at a large, private law firm. The same lawyer who serves as public employee, even if he moves up the hierarchy, will barely make over $100,000.
However, some contend that the benefits for public employees, such as health care plans and vacation days, are excessive. On average public employees do have much better health plans and more vacation time. However, often public employees have sacrificed higher pay they could be earning in the private market in order to take advantage of these benefits. Over the past decades unions have often conceded no pay raises in exchange for being able to keep their quality health insurance plans. In the “free market” of collective bargaining negotiations, unions have demanded plans with low deductibles and a extensive coverage in exchange for concessions on wages. Many conservative have claimed that public employees do not “pay” for their benefits, but this argument ignores economic realities. In one way or another every employee, public or private, pays for the benefits they receive. If an employer purchases a $10,000 health insurance plan for every employee the employee may not “pay” for those benefits by writing a check, but the employee still “pays” for the plan because that $10,000 could otherwise go to paying higher wages. Without the health insurance plan the worker could demand, and likely receive, higher pay. Just like a consumer really “pays” for two products when the purchase a “buy one get one free” deal, an employee “pays” for beneifts through lower wages.
Finally, many criticize the quality pensions that many public employees, particularly those in unions, receive. Once again, it is worth noting that these benefit packages have often been negotiated for over many years. In exchange for lower pay raises public employees often have gained better pension benefits. However, conservatives like Gov. Walker argue that the states and local governments can no longer afford these pension systems. What Walker and others often neglect to mention is that the pension systems were largely on track before the year 2000, when pension funds were often raided and/or neglected by state governments to pay for tax cuts and other expenditures approved by Republican legislatures. Public employees do contribute a great deal to their pensions (often in excess of 10% of their overall pay). The state or local government is often suppose to “match” that contribution. However, in the 2000’s state and federal governments passed tax cuts which decreased tax revenue, often keeping the government from meeting its obligation. The government would often then just issue an “IOU” to the pension fund rather than make their payments. Now, state governments like Wisconsin and New Jersey are claiming they cannot afford to pay the pensions, even though their own actions led to financial situation they face today. In New Jersey Governor Chris Christie (R) is demanding public employees give up many their pension benefits after the state failed to make payments to the pension fund over many years. In Wisconsin, the government was actually on track to meet its budgetary commitments until Governor Walker passed a series of tax cuts that created the current “shortfall.” Now Walker is asking the public employees to take the immediate hit to balance the budget. Even on the federal level, Republicans are now calling on future Social Security beneficiaries to sacrifice their benefits after the Bush administration borrowed from the Social Security Trust Fund for eight years.