The Wealthy Public-Sector Worker: A Myth Debunked

http://www.truth-out.org/the-wealthy-public-sector-worker-a-myth-debunked63107

The Wealthy Public-Sector Worker: A Myth Debunked
Thursday 09 September 2010
Paul Krugman, Krugman & Co.

Whenever the subject of state and local governments' fiscal plight comes up here in the United States, conservatives engage in spittle-flecked denunciations of unions and their crazy pay packages.

Jonathan Cohn tells us in an online piece for The New Republic, published in August: "Conservatives say that excessive public employee pensions exemplify the greed of unions (which sought these generous benefits for public employees) and inefficiency of government (which agreed to pay them). If local and state governments are struggling financially, these conservatives say, they should figure out some way to reduce or revoke those promised benefits, rather than come to Washington and beg for help from the taxpayers."

So, how much truth is there to the theory that massive pension liabilities and bloated benefits for public workers are increasing our financial woes? According to an analysis by John Schmitt at the Center of Economic and Policy Research, state and local employees are paid more, on average, than private-sector workers - about 13 percent more. But Mr. Schmitt's data also shows that this is actually a false comparison: state and local workers are somewhat older than private-sector workers, and they are actually much better educated (about 23.5 percent have advanced college degrees, as opposed to 8.9 percent in the private sector). About half of all state and local workers are teachers and academic administrators - which means that they're college-educated, at minimum.

Think about it: How many ambitious young people say, "My goal in life is to become a high school teacher - that would put me on easy street"?

It is true that in this country, police and firefighters get pretty generous pay packages, but they also pull people from burning buildings.

If you still believe, despite this evidence, that public workers are paid more than they should be, how big an issue is this, really, for state and municipal budgets?

I looked at finance data from the U.S. Census and got the composition of nonfederal government spending shown here:

You'll see two things. First, wages and retirement benefits don't take up an unreasonably large piece of the pie. Second, subtracting a few percentage points either in pay or retirement benefits would not actually make a big difference.
In the end, this is a phony issue.