Are California Public Employees Overpaid?

Read the full working paper as an Adobe Acrobat PDF

Public-private pay comparability has become a major political issue in the past year, with some claiming that public workers are overpaid and others claiming they are paid too little. An important aspect of this debate is the difference between federal workers on the one hand and state and local workers on the other. Although federal workers earn higher wages and benefits than comparable private workers, the state-local situation is more complicated. Compared to private workers, state-local workers tend to earn less in wages but more in benefits. The net impact on overall pay is controversial.

The Center on State and Local Government Excellence, the Center for Economic and Policy Research, the Economic Policy Institute, and the Center on Wage and Employment Dynamics (CWED) have all released similar studies arguing that the wage penalty and benefit premium for state-local workers either cancel out or tilt in favor of private workers.

While these studies more or less properly measure wage differences, none of them considers the full benefit premium enjoyed by state-local workers. A full accounting of benefits needs to include retirement healthcare, job security, and pension funding using the proper private sector discount rate. After including these missing pieces of the benefits pictures, we find that state-local compensation is substantially higher than previous estimates.

Because state-level data varies widely in quality and availability, it is still difficult to say whether state-local workers are overpaid on a national level. This paper focuses exclusively on public workers in California, a large state with reasonably good benefits data. Because the authors of the CWED report also focus on California, we contrast our methods and results with theirs throughout this paper.

CWED concluded that California public workers are not overpaid. However, we find that CWED's analysis of benefits leads to a substantial understatement of state-local compensation in California. With a more complete accounting of benefits, public employees in California in fact earn up to 30 percent more in total compensation than comparable private sector workers.

Andrew G. Biggs is a resident scholar at AEI. Jason Richwine is a senior policy analyst at the Heritage Foundation.

Photo Credit:Rob Lee/Flickr/Creative Commons

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Andrew G.
Biggs

What's new on AEI

Making Ryan's tax plan smarter
image The teacher evaluation confronts the future
image How to reform the US immigration system
image Inversion hysteria
AEI on Facebook
Events Calendar
  • 01
    MON
  • 02
    TUE
  • 03
    WED
  • 04
    THU
  • 05
    FRI
Wednesday, September 03, 2014 | 9:00 a.m. – 10:30 a.m.
From anarchy to Augustus: Lessons on dealing with disorder, from Rome’s first emperor

We invite you to join us for two panel discussions on how Augustus created order from chaos 2,000 years ago, and what makes for durable domestic and international political systems in the 21st century.

Wednesday, September 03, 2014 | 12:00 p.m. – 1:30 p.m.
Multiple choice: Expanding opportunity through innovation in K–12 education

Please join us for a book launch event and panel discussion about how a marketplace of education options can help today's students succeed in tomorrow's economy. Attendees will receive a complimentary copy of the featured book.

Thursday, September 04, 2014 | 12:00 p.m. – 1:30 p.m.
How conservatives can save the safety net

Please join us for a luncheon event in which our panel will discuss what conservatives can learn from how liberals talk and think about the safety net and where free-market economics, federalism, and social responsibility intersect to lift people out of poverty.

No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.