Government workers overpaid?
Government workers overpaid?

There has been comment about salaries in the US public sector being higher than those in the private sector. This is despite the better conditions and job security:

Federal workers earning double their private counterparts

Federal employees’ average compensation has grown to more than double what private sector workers earn, a USA TODAY analysis finds.

Federal workers have been awarded bigger average pay and benefit increases than private employees for nine years in a row. The compensation gap between federal and private workers has doubled in the past decade.

For a comparison broken down by industry sector see Federal pay ahead of private industry

In response to this it has been claimed that if you control for qualifications then the public sector salaries are not greater than private. Essentially they are saying that the pubic sector jobs are higher skilled, so people earn more money. Qualifications are used as a surrogate measure for skills:

Government pay lower than private sector?

Many of the most common state and local government jobs require higher education: teachers, social workers, nurses and university professors. In Michigan, more than half of the state jobs require that applicants have at least a bachelor’s degree.

“Thus, the fact that public sector workers receive greater average compensation than private sector workers should be no more surprising than the fact that those with more skills and education earn more,” said the study.

This is misguided because it ignores the effects of:

  • Credential creep in the public sector. The public sector tends to lack objective measures of performance such as profits or revenue when considering which people to hire or promote. Hence it relies more on paper qualifications. Over time this results in staff with more and higher paper qualifications than warranted or than the private sector.
  • More generous study leave provisions and fewer working hours. This makes it is easier for employees to gain qualifications. Thus the better qualifications of the workforce partly reflect the cushier conditions rather than higher skilled work or employees.
  • Incentives in bureaucracies to expand the number of employees and their apparent skill level. The number of people in a department and the number of people reporting to a manager can influence execuitive salaries. Excess staff can be put to use writing and reviewing briefs. This may appear to be more highly skilled work than many private sector jobs. But it is of little value to society as a whole, which on occasion would actually be better off if no one performed those tasks. As they say “Idle hands, mischief make”. This tends to be in the form of misguided government programs or onerous reporting requirements.

The combined effect of these influences on the qualifications of government workers is to invalidate their use as a proxy or surrogate for comparing skills in the public and private sectors. It is wrong to claim higher wages in the government sector are justified because their work is more complicated and requires higher skills than the private sector as demonstrated by the better qualifications of its workers.

There are a lot more to skills than qualifications. Hence new graduates tend to earn less than those who have been in the workforce for ten or twenty years. Knowledge gained through work experience is essential to many jobs and indicates more about skills than the academic qualifications held. The fact that the privates sector can be hesitant about hiring people who have spent too long in the government sector says much about their relative skills, including their work ethic.

Attempts to undermine concerns about government salaries exceeding private ones on the basis of qualifications are erroneous or deceitful.

It is notable that this conclusion can be reached without asking if salaries in the private sector better:

  • Reflect value of output. Salaries in the private sector may be better connected to the value to society of the workers output than are government ones.
  • Direct resources. Salaries in the private sector help direct people and resources to their best use through the effects of price signals in a free or semi-free market economy. This is not done by salaries and resources determined by government directive as demonstrated by resource misallocation in communist countries and government “stimulus” programs in the West
  • Value of qualifications. It is not clear if many of the politically correct courses impart many useful skills to go along with their lefty conceptual framework.

There may well be differences in skill levels between the government and private sector. But this can not be measured by qualifications or wages. The average private sector worker may be more skilled in terms of creating value to society than their more credentialed government equivalent.

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