[quote=bearishgurl][quote=EconProf]I’ve heard that the public sector workers almost never quit, suggesting that they know they have a good deal. But that’s only anecdotal. Any Piggs have any statistics?[/quote]
EconProf, I don’t know about recent years (since unemployment has been higher in SD). But in the past, there WAS a big danger of losing an employee who has already spent 6 mos to 1 yr (depending on position), on probation and “training.” These were employees who were not yet vested, which took five years (with no LWOP or State Disability Leaves in that five years which were not paid back).
There is an abyss of hoops to jumps thru (and putting up with a load of BS that goes along with that jumping) between an employee’s hiring and vesting, much moreso when on probation. And every time an employee changes classifications (even if a “lateral” move), they are put back on “probation.” It is not uncommon for a public employee to serve 2-3 probationary periods back to back. This in no way implies they will be treated “fairly” while serving a probation.
Employees who were hired with marketable degrees/skills tend to defect before vesting. The danger of staying and vesting (even losing 3-4 years of an employees prime working years) is that they will use a computer on whichever agency they work for’s “network” day in, day out which is entirely proprietary to that agency. The procedures they have to follow day in, day out are also proprietary to that agency. Hence, the need to serve a *new* probationary period at each agency they go to. Many of the job classifications are proprietary to one agency only. After 3-4 years on the job, even if an employee WANTS to get out and work in a “private” job, their resume is now full of duties which have no value to private employers. Especially if their gov position was their first “real” job, a gov employee would very likely have to take a big downgrade in pay if they quit and took a position in the private sector.
After five years, vacation and sick leave accurals typically increase, making it harder to find a gig with even close to similar benefits elsewhere.
One thing private sector employees have over public sector employees is more freedom on the job, namely:
-freedom to visit websites they want to on the “company” computer (within reason);
-ability to telecommute (don’t have taxpayers coming in for services or have to see the agency’s “clients” day after day. And agency’s computers/proprietary information isn’t allowed to be taken home);
-and, don’t have to follow a strict dress code (ex. courts and taxpayers expect professional attire at all times).
Even AFTER vesting, there isn’t a great deal of incentive to work year after year in the public sector unless the public employee just LOVES their duties, their clients, their bosses/coworkers, etc. If they have skills which could get them hired in the private sector immediately (and the job market is such that they can), they often DO quit. The amount each year their pension grows is minuscule in proportion to the hoop-jumping, politics and other BS they have to put up with on a daily/weekly basis year after year.
The above applies to “rank and file workers” who obtained their positions by scoring on an examination and are protected by civil service rules. These employees are the vast majority of government workers.
The above does NOT apply to executive-level workers or officials who are brought in on interviews and reference checks alone (often from another city, county or state and perhaps even from the private sector), and who hammered out their contacts out with the public hiring agencies. These workers have no civil service protection and can (and often do) sue for breach of contract if they are let go before their contract expires. Hence the massive payouts in the OP, which were either in these employees’ contracts to begin with, or paid a lump sum to an employee to get rid of them early (settlement of breach of contract).
I CAN tell you that governments NEVER pay out humungous sums for former employees unless said employee has them over a barrel in some way! Here are three examples where they WOULD pay out but there are several more:
The employee had an ironclad, enforceable contact with the agency to get paid a certain sum over a certain period of time and the agency decides to terminate it early (for any reason);
their own employees made HUGE, GLARING and embarrassing mistakes with said employee;
or, an employee can properly substantiate in a government tribunal or court of law substantial fraud, waste or abuse perpetrated by any officer or employee of said agency, informed their supervisor and/or agency head and the agency PTB looked askance at the complaint(s) and actually retaliated against said informer (whistleblowing statute or qui-tam action filed).
In fact, the opposite is true. Every single government has a passel of attorneys on staff who do NOTHING every day but fight off monetary claims coming from ouside AND inside the agencies of the jurisdiction they represent. The small governments contract out this function to private law firms, but nevertheless, they operate in much the same way as attorneys representing insurance companies, except public entities are “self-insured” (excluding worker’s comp coverage).
If these agencies are “stuck” and/or don’t want a bright flashlight shown to the public on a particular issue (don’t want the press to get wind of it), and/OR they can’t possibly win in court, they’ll quietly pay an employee to “go away” but not without an indefinite “gag order” as part of the deal.
The payouts come out of the following year’s budgets of said offending agencies, as do their “attorney fees.” This often results in “billets” being removed from their budgets (cuts in staff resulting in layoffs or unfilled vacancies dropping from their staffing list).
There is always much more to these large payouts (upon an employee’s termination/retirement of a government job) than meets the eye.[/quote]
Leaders across the country are proposing restrictions on public employees’ pay and benefits in order to put their budgets on a more sustainable path. The political left’s counterattack is that government workers aren’t overpaid compared to those in the private economy. Who’s right?
Consider a study released last October by the Center on Wage and Employment Dynamics at the University of California, Berkeley, which concluded that Golden State public employees “are neither overpaid nor overcompensated.” The Economic Policy Institute has generated reports arguing that government workers are underpaid.
These studies are misleading. Public-private pay comparisons vary from state to state, but a full accounting shows clearly that large, union-dominated states tend to overpay their workers. California is a good example.
The Berkeley study begins by studying salaries, where its methods are solid. Using individual-level data from the Census Bureau’s Current Population Survey, it compares public and private wages while controlling for differences in age, education and other earnings-related characteristics. Using essentially the same methods, we found that California state and local government employees receive wages about 4% lower than those received by similarly skilled workers in large private firms, which offer the most generous pay and benefits. But if we compare public employees to all private workers, the 4% penalty becomes statistically zero.
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Public employees really pull ahead in non-wage benefits.
Slideshow: Teachers Revolt
Public employee protests spread across the Midwest.
Public employees really pull ahead in non-wage benefits. The Berkeley study concludes that counting benefits means that public workers’ total hourly compensation is about 2% higher than that of private workers. But our research shows that the study underestimates what public workers receive from pensions and retiree health programs. It also doesn’t account for the value of job security in government employment. Once these are noted, the balance tilts clearly in favor of public workers.
The first error in the Berkeley study concerns defined-benefit pension plans. The study erroneously conflated what governments pay into defined-benefit plans with what workers will eventually receive in retirement. So if governments contribute 10% of employee pay to defined-benefit pensions while private employers contribute 10% to 401(k)-type pensions, these studies conclude that pension compensation is equal.
But here’s the problem: State and local pensions effectively guarantee employees an 8% return on both their contributions and those made by their employer. By contrast, a private-sector employee with a 401(k) can achieve a guaranteed return of only around 4% by investing in U.S. Treasury securities. Most economists believe governments are foolish to base their funding decisions on the assumption of high investment returns, but the benefits for public employees are guaranteed in any case.
Over a career, the difference between a 4% and 8% return is significant. Using data from California’s major pension funds, we calculate that the higher implicit return on public pensions increases the compensation of California’s government workers by around 4%.
The Berkeley study’s second error is the omission of retiree health benefits. Private workers retire later and relatively few receive retiree health coverage. For those who do, eligibility has been tightened and premiums increased. But almost 90% of state and local governments offer retiree health benefits to employees. They generally retire in their 50s, at which point the government often pays most of their costs, including Medicare premiums and deductibles.
State actuarial reports show the annual cost of California retiree health benefits could top 8% of total compensation. Thus an accurate accounting of pension and retiree health benefits shows that public employees in California are paid about 15% more than individuals working for large private firms (accounting for age, education, etc.).
Another major benefit of public employment is job security. The Bureau of Labor Statistics reports that, on average, a private worker has about a 20% chance of being fired or laid off in a given year. In state and local government, the discharge rate is only about 6%—and several studies have found that public employees are more risk-averse than other workers, meaning they place particular value on job security. We estimate that government job security is equivalent to about a 15% increase in compensation.
Overall, our research suggests that government workers in California are compensated up to 30% more generously than are similar employees in large private firms. And the California experience is similar to that of other large states with powerful public unions. Elected officials are right to reassess public worker compensation as they try to close their budget deficits.
Mr. Biggs is a resident scholar at the American Enterprise Institute. Mr. Richwine is a senior policy analyst at the Heritage Foundation.
