Friday, November 12, 2010

Public Sector Employment and Pay

Yesterday while talking about the Bowles/Simpson proposal, I wrote:

The generic cuts to public worker compensation and public jobs are a joke. Tell me what jobs and how compensation will change, then I'll get back to you. That's just a sop to the right.

I want to expand on that. There are three basic points I want to make here.

First, the cuts are very vague. “Federal employees” is a very broad term that encapsulates all manner of people. Just saying “fire federal employees” is an easy way to “save money” without actually specifying what you want to cut. Who is getting fired? Teachers, regulators, foreign service officers, random staffers, janitors at the Pentagon? Without actually specifying who is getting fired, this is just a sop to populist conservative sentiment that demonizes “overpaid and underworked” (read: unionized) public employees. It’s not an actual proposal unless there are specifications of which employees are considered superfluous. Jon Chait riffs off a Stan Collender post on the same topic here. Well worth the read.

Second, I’m not here to provide a kneejerk opposition to any public sector employee firings or salary cuts. But there needs to be more nuance to this discussion. Too often the debate has gotten bogged down in discussions of whether or not public sector employees are overpaid. (The uneasy consensus seems to be that high-level, highly educated employees are underpaid and low-level employees are overpaid.) To me, that argument is beside the point.

The hostility towards the amorphous public sector employee is rooted mainly in small government ideology. I don’t share that ideology, so for me, the priority should be ensuring that essential government functions are carried out efficiently and well, while the government gets out of doing non-essential things. For example, I don’t have a problem with well-compensated regulators at the SEC or MMS if they’re doing their jobs well. On the other hand, I think Dairy Management workers are overpaid at any price, since the federal government should not be acting as a marketing firm for cheese. The point is, again, focusing on numbers of public employees is a blunt and stupid way to shrink government. Focusing on the functions that government should be performing is the more logical approach.

Finally, I do agree that public sector employee pay could use reform. But again, the Simpson/Bowles method (also known as the conservative Republican method) is blunt and won't tackle the root of the problem. The real problem with public sector empolyees, particularly in state and local government, is that their pension and benefits costs are way out of line with private sector workers. Along with that, the pension funds have been mismanaged by those governments. Freezing their pay does nothing to fix that. All it does is piss off dedicated public servants.

Now, I understand that the thinking behind the generous benefits is that it makes up for the low nominal salary. I think we’re finding that it was a bad bargain to make. This structure allowed lawmakers to pay employees with future promises that they didn’t have to pay for. The current structure is hard on future budgets, since it ties their hands with defined benefit pension obligations. It also attracts workers who are more interested in the stability and long-term security than the folks who might be more motivated to work hard and make good money up front.

Switching to a private-sector style pay structure would be beneficial on several levels. Higher starting salaries could attract better talent for public sector jobs. With the higher starting pay, retirement planning can switch to a defined contribution structure with matching, like the 401(k)s common in the private sector. This avoids saddling future administrations with debt and obligations, while still allowing employees to adequately prepare for retirement. Once employees retire, they will no longer be burdens on their employers. This is tough medicine to swallow for those who are currently working in the public sector, but this structure has been common in the private sector for some time.

There's no reason to resort to the proverbial hatchet, when targeted reforms would be more likely to actually take effect, as well as leading to more efficient government instead of just smaller government.


  1. Another problem is the concept of unionizing against the government. You unionize to increase bargaining power. But what sort of stance does the government take against employees? They have very little reason not to cave into demands at negotiations, which leads to ever-increasing job security and benefits packages.

  2. Federal employment is certainly an area for budget cutters to look at, however the discussion should start with some facts rather than the usual "common knowledge" (aka lies).

    As of right now, we have slightly over two million civilian federal employees. We also had slightly over two million federal employees in 1952.

    In 1950 the population of the United States was 151 million. Today the population is more than twice that at 309 million.

    The 2 million federal employees now administer programs for more than twice as many Americas with the same workforce.

    In addition to the doubling of the population that demands service, there are hundreds of programs and agencies that did not exist in 1952 that now must be administered. These include very popular programs like Medicare and popular agencies like the Department of Veteran's Affairs. Of course, some federal employees are wildly unpopular like those in the United States Congress but they must be funded too.

    It would be nice if, for once, the politicians and the America voters actually considered facts before making any decisions.

    Until politicians care more about their country and its future than getting reelected and until voters stop demanding benefits while refusing to pay for them we will never solve the budget problems we are facing.

  3. A couple things. First, while Simpson/Bowles is focused on Federal employees, my post is meant to apply to public sector employees at all levels of government. (Then again, if it gets more cost-effective to hire people, maybe the county DHS will stop contracting with my agency to do stuff.)

    And really, I mostly agree. The point of my post is that focusing on numbers is stupid. Focusing on making sure government is staying out of stupid things like Dairy Management is more important.

    But Simpson/Bowles is very similar to Heritage or AEI's wishlist, so of course there are unjustified and unspecified attacks on federal workers.

  4. I know my comment wasn't really on point but I had something I wanted to say and you gave me the opportunity to say it. Gracias!