More Compare and Contrast

Readers of this blog will know that public vs. private pay has been in controversy over the last few years.  There is a large literature on the subject which points out that differences between the public and private sector need to be adjusted for factors such as occupational composition and size of employer.  I would characterize the literature as indicating rough adjusted comparability; some studies say public pay is somewhat more; some say the reverse.  Benefit valuation – particularly pensions – is the trickiest part.

The U.S. Bureau of Labor Statistics puts out quarterly unadjusted data on private sector pay and benefits and state and local pay and benefits.  It has just released the data for June 2012.  The release contains the following cautionary note:

Comparing private and public sector data

Compensation cost levels in state and local government should not be directly compared with levels in private industry. Differences between these sectors stem from factors such as variation in work activities and occupational structures. Manufacturing and sales, for example, make up a large part of private industry work activities but are rare in state and local government. Professional and administrative support occupations (including teachers) account for two-thirds of the state and local government workforce, compared with one-half of private industry.

One simple partially adjusted contrast is to look at larger private employers and compare with state and local (since govt. agencies tend to be larger entities).  That contrast omits an adjustment for occupation as per above.  In the latest U.S. Bureau of Labor Statistics release, hourly pay is about the same when state and local workers are compared with larger private employers.  Pensions (especially defined benefit) and health care are more prominent in the public sector. Note that defined benefit pension costs can be understated if employers are underfunding their systems.  Legally required payments in the public sector are lower since some public workers are not under Social Security.  Below are data from the latest BLS release.  [View in Courier font if the table looks funny.]

June 2012        Private |Private     |State &

Employer         Total   |500 or more |Local

Costs/Hour               |Employees   |

= = = = = = = = = = = = = = = = = = = = = = = =

Total

Compensation     $28.80   $42.39       $41.10

Wages &

Salaries          20.70    27.79        26.70

Retirement

 *Defined

  Benefit           .43     1.00         3.21

 *Defined

  Contribution      .59     1.10          .31

Health             2.21     3.78         4.82

Legally

Required           2.37     3.03         2.53

= = = = = = = = = = = = = = = = = = = = = = = =

Source: http://www.bls.gov/news.release/ecec.htm