Government employees now take higher salaries than private workers

When I worked for a state legislator in Texas, his policy was his legislative offices were open any time his private business was open. I spent many a lonely day in a largely abandoned Texas Capitol on government holidays that were ignored by the world in general. I also enjoyed marvelous health insurance benefits. The birth of my third child cost me personally a total of $20.

Wonderful benefits, extra holidays, and job security for government employees are often justified as relatively inexpensive perks that compensate for comparatively low government pay. That justification, however, no longer applies.

The Cato Institute recently pointed to data from the U.S. Bureau of Labor Statistics that show just how well state and local government employees are paid. On an hourly basis, government employees receive salaries that, on average, are 34 percent higher than private workers. Benefits are even better, with government paid leave worth 77 percent more and health insurance valued at 118 percent higher. Most government workers enjoy a lifetime claim on taxpayers’ wallets when they retire, too.

State-level statistics are not as easy to break down. However, the Tax Foundation has shown that in 2007, Arizona’s average state and local government employee made $300 a year more in total compensation than the average private worker. The latest federal statistics show that in 2008, the margin had grown to more than $1,000.

Considering today’s budget problems,  it’s time to get government employee pay and benefits under control, including paid leave, health insurance and retirement pensions. We could start by moving government employees to high-deductible health insurance plans coupled with tax free Health Savings Accounts. This could save the state millions in annual premium increases. We should also convert government pensions to defined contribution plans–like a private sector 401k–instead of defined benefits. This won’t be a huge short-term money saver, but it will keep the state solvent in the long-run.

Dr. Byron Schlomach is an economist and the director of the Center for Economic Prosperity at the Goldwater Institute.

Learn More:

Goldwater Institute: $50 Billion Tidal Wave: How Unfunded Pensions Could Overwhelm Arizona Taxpayers

Cato Institute: Employee Compensation in State and Local Governments

Tax Foundation: Average Total Compensation in State and Local Government, Federal Government, Military, and Private Sectors, 2001 and 2007