The Protected Class (Part 2)

This is the continuation of a previous post regarding government emploment benefits:

Not only do government employees have greater job security, they also have quite the compensation package. The government and general public have gone back and forth about the ligitimacy of government salaries, which are on average much higher than those in the private sector. The argument has been made that government work requires more education than the standard private sector job, and therefore salaries for government employees should be higher.  The figure below shows the makeup of public and private sector compensation in Michigan with best data availible from the BLS.

State Benefits

This higher education argument does not seem to explain away all of the discrepancy however as the Mackinac Center argues. Mackinac’s “What Price Government” finds government workers earning more than similar private employees in several vocations including food service and corrections. Nonetheless, it is hard to quantify just how much of the difference in salaries is warranted and how much is splurge. A clearer picture can be drawn for benefits on top of wages.

In 2000, Michigan’s classified workforce received benefits worth an additional 37.95 percent of salary each year. By 2008, the figure grew to 58.15 percent. At the same time, Midwest private-sector benefits, the closest estimation for Michigan private-sector benefits available from the BLS, are worth only 43.62 percent of salary — meaning that government rates are 33 percent higher than private ones.

According to calculations based on data from the Bureau of Labor Statistics and figures from the Michigan Civil Service Commission, Michigan’s state and local government full-time employees are getting $5.7 billion more in benefits than they would if their benefits were equal to those of private-sector employees.

Even more surprising is the comparison of Michigan’s benefits to National government averages. While government salaries and benefits are inflated nationwide, Michigan’s are some of the highest. Doing calculations similar to those above, equalizing Michigan state and local government full time employee benefits to the national state and local government average would save the state nearly $1.5 billion annually. How can the higher education argument stand in light of these facts?

Michigan cannot afford to carry these extravagences, especially in light of an imposing $1.6 billion overspending crisis.

Adam Rule – MCPP Intern


2 thoughts on “The Protected Class (Part 2)

  1. Nice Job.

    Leon also has done some work on this as well.

    The numbers are similar, though he notes that to cap the cost of government employee benefits at the same level as the average benefits earned by full-time private sector citizens would save the state over $3 billion.

    Worth looking at.

    As he has pointed out at times.. the state employes might have to learn a new word.. “Co-Pay”

  2. As a MI state employee (who came from working in the private sector for over 25 years) I am going to agree with you on most points.

    On average state employees do have higher salaries, they do not, however get bonuses if the “company” does very well. Neither do all private employees. Perhaps a reward system for public sector employees with a base salary would help alleviate the personnel costs during lean times. Also, jobs need to be compared on an individual basis – not as a lump (perhaps you did this – but it is not evident in the article).

    Health care – yes we do have expensive benefits, primarily because the state pays the majority of the premiums. We do have copays, but coverage is limited. With one root canal I used up dental coverage for a year and will now pay for cleanings out of pocket. It has been a few years since I have had benefits through a private sector company, but I will say they were MUCH better than anything through the state. We had a menu plan with multiple offerings etc etc. We did pay a greater portion of the premiums though. I am not opposed to that option if it means access to better health care.

    Yes there is room for well thought out reform on a number of levels.

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