Federal Worker Pay: How Much is Too Much?
By Megan McArdle
Via Greg Mankiw, I see that the CBO is saying that yes indeed, most federal workers make more than their counterparts:
Differences in wages between federal employees and similar private-sector employees in the 2005-2010 period varied widely depending on the employees' level of education.
•Federal civilian workers with no more than a high school education earned about 21 percent more, on average, than similar workers in the private sector.
•Workers whose highest level of education was a bachelor's degree earned roughly the same hourly wages, on average, in both the federal government and the private sector.
•Federal workers with a professional degree or doctorate earned about 23 percent less, on average, than their private-sector counterparts.
Overall, the federal government paid 2 percent more in total wages than it would have if average wages had been comparable with those in the private sector, after accounting for certain observable characteristics of workers.
The disparity in benefits is even larger; the CBO estimates it at 48% higher than comparable civilian employment.
So highly educated federal workers make less than their private counterparts, middling workers make about the same, and low-wage workers make a bit more. Some people might be happy that in a time of shrinking wages there are still some people able to afford to live thanks to their government salary. They might even think that highly educated government workers should be paid more. Not many people will look at those on the lowest rung of society, stroke their chin thoughtfully, and sit down to ruminate about how the lowest-paid workers could be forced to work for even less money.
As someone who has many family members who work--or have worked--at various levels of government, this seems pretty unsurprising. There's a reason that low-skilled workers are eager to get taken on at the Post Office. As my father pointed out when we heard that Warren Buffett's secretary was making $60,000 a year, high-level secretaries in the City of New York were making more than that in the 1970s.
That's hard to believe. Median household income in 1975 was $10,565. Median Household Income in 2010 was $48,753. Adjusted for inflation, $60000 in 1975 would be $240,376.62 in 2010.
I think we argue about this because people in the punditariat identify with the relatively small portion of the workforce that has professional degrees--not least because that is the portion of the federal workforce with whom reporters and various flavors of analyst generally interact. Lawyers at Justice, and doctors at CDC, in fact make much less than their counterparts in private practice.
However, it's worth noting that lawyers at Justice, and doctors at CDC, have a much better quality of life, including close to 100% job security and excellent retirement benefits, than people in private practice. That is very valuable.
Because government budgets are never cut and government employees are never fired, and doctors and lawyers who work for large companies never have excellent benefits.
In fact, we can quantify how much it's worth, at least to the folks who take those jobs: at least as much as the salary differential between their current job, and comparable opportunities in the private sector.
Which of course points out the irony of trying to ascertain whether federal workers are overpaid or underpaid. The right question is not "Would these people make less in the private sector?" It is "Are we getting a high enough quality workforce?" And also "Could we get the workforce we need for less?" At any rate, that's the right question if you view government programs as a means to provide services. If you primarily view them as existing for the benefit of the people they employ, then of course, the right question is "how can we employ even more people at ever higher wages?"
And why on earth would we ever want people to earn a decent wage? It's not like 70% of our economy is based on consumer spending.
My answer to that last question is a resounding "basta!". My answer to the first is, "I don't know". On the middle issue, however, I think the CBO's data suggest that we could probably get workers with a bachelor's or lower for less money than we are now paying, and not suffer much decline in quality.
Because private businesses are able to depress wages, public business should depress wages as well, since we have just proven that people can be forced to take lower wages! Because the purpose of business is to get as most out of its workers as possible while paying their workers as little as possible. We have seen what happens when businesses are given a free hand to set wages and naturally they took the McArdle view: screw the worker to increase profits.
But some workers are more equal than others. McArdle does not want everyone to receive lower wages, and in fact becomes quite irate at the thought of lower wages for CEOs and those in her own social and economic class.
Stop Fixating on the Administrative Overhead of Non-Profits
By Megan McArdle [Princess of Economics and Kisser Of The Royal Corporate Ass]
[yip yip yip]
[T]he worry about charity overhead has gotten completely out of hand. I've heard from more than one frantic foundation fundraiser who can't raise a dime for overhead--everyone wants their money earmarked for programs. None of the donors seem to realize that even at a very well run charity, the electric bill, accountants, IT staff, grantwriters, compliance experts, investment managers, and yes, fundraisers do not actually get paid by good fairies who drop off wee buckets o' gold at the beginning of every month. Or that unless you have all those boring-yet necessary things, you cannot actually run any programs.
Now, of course, donors should make sure that the causes they support do not simply become sinecures for the people running them. But they should not wring their handkerchiefs when they discover that--whoda thunkit?--charities have to have offices and coffee makers just like all the places that donors work.
Nor is there one right level of overhead for an organization. A group that provides a lot of very expensive services might have a very low central overhead rate, while a group that has a heavy legal compliance burden, or has a large number of low-cost operations to coordinate, or has a small endowment which requires constant fundraising, might have high overhead. Maybe Susan G. Komen's numbers are out-of-whack, but you can't prove it by saying that 20 cents on every dollar go to overhead. You have to assess what they do, and how much that costs.
You certainly shouldn't use those sorts of numbers as a political club. Unless you're very, very sure that none of the groups you support put a lot of their money towards overhead.
Komen should be left alone to pay its CEO $459,406 a year, but people being paid a little over $20,000 plus benefits should have their pay cut, because "we could probably get workers with a bachelor's or lower for less money than we are now paying, and not suffer much decline in quality." That's output quality, not quality of life, of course. Quality of life is for the Galts, not the moochers and looters who do the dirty work that supports the lives of the superior people.