Revisiting the public/private pay gap


The libertarian Reason Magazine has a — shall we say — provocative article online, entitled “Class War: How public servants become our masters.”

It raises some valid points about problems associated with public-sector employment: The impending “pension bomb,” for example, is a serious threat to the finances of many state and local governments. But I think the author, Steven Greenhut, makes a couple of questionable propositions about the federal government.

The Obama administration has extended the hiring binge, with executive branch employment (excluding the Postal Service and the Defense Department) slated to grow by 2 percent in 2010—and more than 15 percent if you count temporary Census workers.

It’s true that the government has grown over the last eight years, and it looks like it will continue to grow during the Obama administration. But including temporary Census workers, even as an aside, is intellectually dishonest — since they are, as the name implies, temporary. They’re also part of a constitutionally-mandated decennial census, so until someone figures out a way to conduct a census without door-to-door canvassing, they’re necessary.

(And, yes, there are a lot of them — 1.2 million — but this is a big country.)

The Reason article also raises the issue of public and private sector pay parity, which we’ve discussed on this blog before. There are some analytical problems with this comparison, namely the fact that the private sector has a much higher concentration of low-wage jobs than the public sector.

Even if we concede that public sector wages are now significantly higher than private sector wages, we should ask: Is that because government employees are overpaid, or private sector employees are underpaid?

The Bureau of Labor Statistics reports that private-sector wages, adjusted for inflation, have remained almost flat over the last two decades. (Family incomes are rising, because women entered the workplace in large numbers, but individual incomes have barely grown at all.)

Perhaps that helps to explain the growing public/private pay gap?


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  1. The answer is simple: the public sector worker are over-paid. The reason for that is also simple: governments have a guaranteed revenue stream and are far less constrained by costs than private employees. Higher public sector wages are entirely financed by taxes. Taxes reduce private sector incomes. In other words, the private sector wage stagnation is at least partially caused by the increase in public sector wages.

    That’s just basic economics.

  2. Where does all that federal pay come from?

    The sky?

    Oh, that’s right.

    Taxpayers. People who produce. The private sector.

    Newsflash: The private sector needs the government bureaucracy less than the government bureaucracy needs the private sector.

    Without us, there’s nobody to loot. We can’t keep gorging an unprecedented expansion of the unproductive sector of our economy (the government) at the expense of the productive sector.

  3. Most federal employees are highly educated. Once, I would like to see a salary comparison that accounts for educational level.

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