DRJ's Blog

March 1, 2011

The numbers that people throw out as to Public versus Private sector compensation are all over the map. This may be the best data out there, as it was collected by the Bureau  of Labor Statistics on compensation. As you can see, Public sector pay averaged $39.66 per hour in 2009, which was 45 percent higher than the private sector average. Not 100 pecent higher, as some might claim, but certainly not in line with what the people paying taxes to support those Public sector employees made. Furthermore, the Public sector advantage was 34 percent in wages and 70 percent in benefits.

If it strikes you that public sector workers have the largest advantages in health insurance, defined benefit pension plans, and paid leave then give yourself a gold star, but all of this, particularly the early retirement benefit,  is at the heart of what's wrong with Public sector employment.

Public sector workers generally retire earlier than private sector workers and enjoy generous pension benefits for life indexed for inflation. They can typically retire at age 55 after 30 years of work, as in California’s CalPERs system.14 In CalPERs, workers receive an annual pension equal to 60 percent of final salary after 30 years. Public safety workers in CalPERs can retire at age 50 after 30 years of work with benefits equal to 90 percent of their final salary.

I was just out visiting California this weekend, and I drove by Disneyland on my way to deliver a speech at an investment conference. Perhaps I should have stopped in and visited Fantasyland, as that's the only place (other than France!) where Public sector employees can continue to expect 34 percent in wage and 70 percent in benefits advantage over the taxpayers that after all, shoulder the burden for what many of us would rightly call "lavish" compensation schemes.



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