State and Local Scapegoats

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Written by John Schmitt   
Monday, 07 June 2010 12:31
Maggie Haberman and Ben Smith have a piece at Politico on how politicians seeking to cut state budgets are taking aim at state and local government workers.

One of the political footballs here is whether state and local employees are paid "too much." The right and, increasingly, the mainstream media have emphasized that, on average, state and local workers make substantially more than private-sector workers.

On average, this is true. But, just over 50 percent of state and local workers have a four-year college degree (or more), compared to only about 30 percent in the private sector. And the typical state and local worker is about four years older (and therefore has about four years more labor market experience) than the typical private-sector worker. Once you control for just these two factors, the average state and local worker earns *less* than a comparable private-sector worker. (For details, see (1) Keith Bender and John Heywood, "Out of Balance?" and (2) my recent report for CEPR, "The Wage Penalty for State and Local Government Employees.")

These analyses refer to wages and salaries only. There are no data that would allow a comparable analysis that includes benefits, but Bender and Heywood do a good job showing that factoring in benefits doesn't change the picture much. (I make the same argument less formally here, too).

There are a lot of reasons that benefits don't change the picture that much, but one is that about 30 percent of state and local workers do not participate in Social Security. As a result a significant chunk of S&L pension spending goes just to make up for their employees' loss of Social Security income in retirement.