

Federal workers earning 2X their private counterparts - startuprules
http://www.usatoday.com/money/economy/income/2010-08-10-1Afedpay10_ST_N.htm

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jswinghammer
This is a problem in the federal, state, and local governments right now. The
biggest issue relates to pension plans and the government's commitment to
defined pensions. This is playing out with major consequences all over the
country. Every state is trapped in pension plans for its employees. I'm not
sure how you can justify pensions for government workers when most workers in
the private sector have no pension plans at all. I've never been offered one
nor do I know anyone who has been offered one. Then again I don't have a
powerful union arranging these things for me on my behalf.

I'm sure nothing is going to be done about this on a federal level as budgets
are only a concern for state and local governments who in some cases have
balanced budget amendments to deal with.

Unions never will accept pay cuts for its members instead preferring that
members be laid off instead. I don't quite get the logic but that seems to be
how it's playing out all around the country.

As a country we're totally broke right now and we need to start acting like
it.

~~~
evgen
> I'm not sure how you can justify pensions for government workers when most
> workers in the private sector have no pension plans at all.

This is because until just recently most private sector workers had similar
pension plans. These plans enabled companies to push their costs into the
future and appear to be "saving" money by getting workers to accept smaller
wage increases in return for better benefits. Fast forward to the 80s & 90s
and the overhang from these plans started to come due; large companies were
discovering that it was easier to declare bankruptcy and reorganize rather
than live up to their prior commitments.

The problem is that it is harder for governmental entities to declare
bankruptcy so that they can skip out on their obligations, the public also
seems loathe to actually pay for the services they demand so the day of
reckoning was pushed further ahead -- we have now reached the point where it
is no longer realistic to continue this practice.

You may not have ever been offered a defined-benefit pension, but that just
reveals your youth more than anything else. The tax code changes that allowed
401(k) plans to exist did not happen until 1980 and they were rather rare
until the early 90s. The process of converting pre-existing defined-benefit
plans into defined-contribution plans (aka "cash balance plans") was the
source of a great deal of legal wrangling and numerous court cases.

As to why a union would prefer layoffs instead of salary cuts it is a rather
simple logic. Salary cuts put the cost of decreasing payroll expenses entirely
upon the workers, the business still gets the benefit of the larger workforce
at a lower cost. By forcing layoffs the union seeks to make the business share
in the pain: they pay less to their employees, but end up with fewer employees
and a diminished capacity to operate the business. If the economy picks up
again the business has to hire new workers and these workers join at the
higher salary, while if the workers had accepted a pay cut they would have to
once again fight the company management to get salaries increased to the point
they were at before the cuts.

~~~
jacoblyles
But pension problems are not just a legacy issue. Payments have increased
recklessly in recent years. California's 3% at 50 law, which allows many
public employees to retire with 3% of their final pay for every year worked at
age 50, was passed in 1999. In 2005, BussinessWeek found that state and local
pension obligations increased by 50% over the previous 5 years (source:
<http://reason.com/archives/2010/01/12/class-war>).

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kscaldef
This "study" is useless without comparing people working similar jobs. Federal
civil servants are typically white-collar, well-educated, highly-specialized
professionals. The average private sector employee is not.

The overall impression I get from friends and family members in the DC area is
this: there's a strong appeal to the stability and pension plans available
from working for the federal govt (although for young workers, the pension
plans aren't nearly as good). However, once you're fully vested in the pension
plans, almost everyone switches to private industry because the salaries are
higher. (Frequently, this actually means doing exactly the same work, but as a
govt contracter through a private company rather than a direct hire.)

~~~
CWuestefeld
That's not completely true. Consider the difference in benefit _rate_. For
private-sector, the benefits are about 20% of the salary. For federal
employees, the benefits are about 50% of the salary.

Now, since large components of benefits (notably healthcare) are essentially
fixed, independent of salary, then if private-sector jobs tend to be of a
different class that are lower paid, then that fixed portion of benefit ought
to make the benefit _rate_ be higher for those private jobs.

But just the opposite is shown in the data. Not only do pub sec jobs get paid
more, but they get a higher rate of benefits on that pay.

I can't conceive of any explanation for this difference that could be in any
way equitable. All I can see is that pub sec workers get an obscene amounts of
benefits relative to what I and my colleagues get -- yet the ones paying for
that are, in fact, me and my colleagues.

~~~
kscaldef
You realize that lots of people don't get any healthcare benefits at all,
right? Or paid vacation? Or company pension plan / 401k?

Is that equitable? No. But the problem is more on the side of private sector
jobs providing no benefits rather than govt jobs providing too much.

~~~
anamax
> Is that equitable? No. But the problem is more on the side of private sector
> jobs providing no benefits rather than govt jobs providing too much.

Those private sector jobs are paying for the public sector benefits.... If
their beneifts are inadequate, why should they be paying for someone else's
better benefits?

If you think that you can run a private sector biz and provide more benefits
than SOP, go for it. Your employees will have it better and you'll have better
employees, which will let you crush the competition, which you clearly think
is, at the very least, wrong.

That's pretty close to a moral imperative so ....

~~~
kscaldef
That argument doesn't hold water.

a) The people with jobs without benefits are paying minuscule taxes, so it's
wrong to say they are paying for the benefits of public sector employees in
that sense.

b) Every time they buy something from a company that does provide benefits to
some or all of its employees, those people are "paying" for someone else's
benefits. But no one seems to complain about that.

This whole thing is an apples & oranges comparison. Right now, there's a class
of jobs that gets benefits and a class of jobs that doesn't. Federal
government jobs are overwhelmingly in the first category. Comparing them to
the overall population of private sector jobs is silly.

~~~
anamax
> a) The people with jobs without benefits are paying minuscule taxes, so it's
> wrong to say they are paying for the benefits of public sector employees in
> that sense.

They're paying sales and gas taxes. They're paying property and utility taxes
(either directly or through rent). They're paying garbage collection fees.
They're paying for stamps. They're paying for licenses. And so on.

Poor people pay a lot of money that ends up in govt workers pockets. And they
can't pick a different provider.

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wheaties
They should break down that compensation according to positions. I once
considered a government job until I saw that as a programmer I could make 18k
more in industry. Over the years this has not changed considerably. This is
vividly expressed by the remarks of the current red-headed poster child,
minerals management services. There people could earn up to 2x their salary by
going into private practice.

Where my own personal analysis has not considered is the defined pension plans
(which I've always considered more of a liability due to their chronic
underfunded nature.)

~~~
smallblacksun
The big difference is not in salary, but in benefits.

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gte910h
USA today is comparing the average size of grapefruit to the average size of
limes here.

A Bad paper is doing bad statistics

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mkramlich
Sounds like an apples-to-oranges comparison. So many differences between the
public employment sector and private. To pick just one example, probably the
top pay for a government worker in any branch appears to be somewhere on the
order of $100-200k (not sure exactly but I'd be shocked if it's 10x that
much). But in the private sector, clearly the top pay (CEO's, hedge fund
owners, entertainers and athletes) seems to be in the $100m range. That's a
factor of 1000 difference at the top. So this is bound to throw off the
averages. (They did say average, therefore mean, and not median.) And of
course also in the private sector there are certain employment areas like farm
work and restaurant workers where the pay is at or below minimum wage, some of
which to illegal aliens and under-the-table cash pay that isn't counted. I'd
be surprised if anybody that works directly for the government gets as low as
minimum wage for anything. Plus add the fact that the mix/distribution of jobs
in government is going to be totally different than in the private sector
(eg., no strippers or baseball players work for the government) and they're
making a truly apples-to-oranges comparison, and the conclusions they're
implying are invalid.

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hop
How can benefits be $41,791? If this is the average, what are they on the high
side?

~~~
kscaldef
TFA says "Most of this was the government's contribution to pensions". But
also consider that decent health insurance for a family is getting up near
$10K a year, and federal employees get pretty generous vacation time, which is
probably worth several thousand as well.

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jleyank
I think there IS an apples/oranges comparison. Look at the salaries for PhD
Chemists (published by ACS, as well as GS pay scales), private industry looks
to be at least 10-20% higher than Govt grades. Google is your friend, albeit a
wordy one...

And I think people forget that the GS retirement system changed for those
hired in 1984 onwards. Before that, they had a pretty sweet system that didn't
involve social security - so they could retire, work 10 years and double dip.
For newer workers, they paid into and used the social security system from the
start, making double dipping much much harder. Sorta sucked.

And the raises were terrible - in the mid 80's I saw 3%, 0%, 3% and 2% raises.
No bonuses, stock options, etc.

So maybe the average private worker is paid less than the average government
worker. But I venture to say that the average financial sector worker's doing
well above any other-field worker you care to choose. Possibly including part-
time bank tellers in with those trader types.

------
njharman
> "Can't we now all agree that federal workers are overpaid and do something
> about it?"

No, we can't. We could agree that private sector pay increases and real wages
have stagnated and private sector workers are underpaid.

Except the analysis methodology is bunk and either or any conclusion is
hogwash.

~~~
dsspence
Well said.

Wages have flatlined over the past 30 years, partially because the higher cost
of benefits has absorbed what would have been a pay raise.

I'm glad whenever someone, whether they are government workers or union
workers (or both), can secure a living wage. It's a victory for the entire
middle class.

------
anigbrowl
This newspaper story is somewhat misleading. It counts benefits as pay,
including unfunded future liabilities, and draws no comparison between the
composition of the private and public sector labor force. For example, federal
employees are much more likely to have college degree. More on this here:
[http://faq.bea.gov/cgi-
bin/bea.cfg/php/enduser/std_adp.php?p...](http://faq.bea.gov/cgi-
bin/bea.cfg/php/enduser/std_adp.php?p_faqid=320&p_created=1156971364)

I do think it's a reasonable issue to examine, and that public-sector hiring,
pay and liabilities have expanded too fast. I also think both political
parties bear the responsibility for this.

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blahblahblah
The average (mean) is useless as a measure of central tendency when applied to
a data set with outliers. Salary data has a highly skewed distribution with no
shortage of outliers. If the author wanted to be credible, they should have
compared apples with apples (federal employees vs. private sector employees
with similar education/credentials) and printed the median pay of the two
groups, or better yet, plot two histograms. As written, the article comes off
as being the work of a know-nothing with an axe to grind.

------
noname123
Does anyone know how much a federal IT analyst make per year? If it's six-
figures plus a full life-time tenure and pension. Then, I want to be on the
American tax-payers' payroll!

~~~
sabat
Me too. And I'm an American. I should look into dat.

------
bitskits
Deficits, explained.

~~~
wonderzombie
Our un-winnable and unending adventures in Afghanistan and Iraq are orders of
magnitude more costly than wages and benefits for federal employees. This is
not to mention the cost of the Bush tax cuts.

[http://www.cbpp.org/cms/index.cfm?fa=view&id=3036](http://www.cbpp.org/cms/index.cfm?fa=view&id=3036)

tl;dr version: [http://www.cbpp.org/images/cms//12-16-09bud-
rev6-28-10-f1.jp...](http://www.cbpp.org/images/cms//12-16-09bud-
rev6-28-10-f1.jpg)

~~~
CWuestefeld
Your link doesn't support your claim -- the costs of wages and pensions aren't
even shown in it.

That's probably because your claim is incorrect. Consider:

<http://srph.it/bpv3RU> \- _The deficit facing U.S. public pension funds will
grow to $2 trillion, according to an interview that the chairman of New
Jersey's pension fund, Orin Kramer, gave to the FT. "Estimates of aggregate
funding requirement of the US pension system have ranged between $400bn and
$500 bn, but Mr Kramer's analysis concluded that public funds would need to
find more than $2,000bn to meet future pension obligations."_

<http://www.globalaging.org/pension/us/2010/analysis.htm> \- _The
multibillion-dollar pension funds that promise to pay lifetime benefits to
millions of the USA's retired teachers are more than $900 billion in the red,
a new analysis shows. ... Actually, Pew said, the $1 trillion figure "likely
underestimates the bill coming due" because it doesn't fully reflect "severe
investment declines" in 2008._

<http://www.globalaging.org/pension/us/socialsec/stanford.htm> \- (noting that
this refers to California, rather than Federal) _"The simulation shows that
the state would need to invest more than $200 billion, and possibly as much as
$350 billion, today to return the fund to a minimum responsible level of
funding," said Bornstein, who noted that the figure is approximately four
times the current state budget._

