TOPICS > Politics

Protests in Wisconsin, Elsewhere Stir Debate on Public vs. Private Pay, Benefits

March 1, 2011 at 6:23 PM EDT
Wisconsin public employees continued another week of protests as Gov. Scott Walker presented his budget plan for the coming year to the state Assembly. Jeffrey Brown talks with Harley Shaiken of the University of California, Berkeley, and the Cato Institute's Chris Edwards about public- vs. private-sector benefits and pay.

JEFFREY BROWN: Next, to the Wisconsin showdown and the question of public sector pay.

PROTESTERS: Kill the bill! Kill the bill!

JEFFREY BROWN: The two-week-old battle in Wisconsin over collective bargaining rights for union workers remained at a standoff today, with no signs of a deal in sight.

Even as that played out, this afternoon, Gov. Scott Walker presented his budget plan for the coming year to the state assembly.

GOV. SCOTT WALKER (R-Wis.): The facts are clear. Wisconsin is broke. And it’s time to start paying our bills today, so our kids are not stuck with even bigger bills tomorrow.


JEFFREY BROWN: Outside the capitol, hundreds of angry protesters continued to march against the governor’s plan to help close the state’s deficit by curbing or ending bargaining rights for most public sector workers.

NARRATOR: It’s a sea of red ink in Madison.

JEFFREY BROWN: Walker got some support today in the form of a television ad put out by the Republican Governors Association.

NARRATOR: In Wisconsin, leaders don’t run away from tough problems, like the Senate Democrats. Instead, they stand and lead, like Gov. Scott Walker.

JEFFREY BROWN: That came after President Obama reiterated his support for public employees yesterday.

U.S. PRESIDENT BARACK OBAMA: I don’t think it does anybody any good when public employees are denigrated, or vilified, or their rights are infringed upon. You know, we need to attract the best and the brightest to public service. These times demand it.

JEFFREY BROWN: In fact, two new national polls offered some comfort to embattled unions. A New York Times-CBS News poll found that 60 percent of Americans oppose efforts to weaken the collective bargaining rights of public employee unions. Thirty-three percent support the effort.

And a Pew Research poll released yesterday found 42 percent of adults surveyed nationwide sided with the unions, while 31 percent sided with Gov. Walker in their dispute.

A key issue in the national debate: Do public-sector workers do better than those in the private sector, or to put it more bluntly, are state and municipal employees overpaid? Numerous studies have been done, but researchers draw different conclusions, partly due to factors that make direct apples-to-apples comparisons difficult.

Those include differences in salaries based on education level and wide variations in compensation packages among states and municipalities, and how to weigh the benefit of a traditional pension versus the riskier 401(k) or less tangible benefits, such as increased job stability?

In the meantime, the debate over unions continues to spread beyond Wisconsin. In Ohio today, thousands of protesters converged on the state capitol, where legislators are considering taking up a bill this week that would end collective bargaining rights for all public workers and eliminate their right to strike.

And we take up the contentious question of public- versus private-sector pay with Harley Shaiken of the University of California, Berkeley, where he specializes in labor issues, and Chris Edwards, who works on tax and budget issues at the Cato Institute, which is dedicated to free markets and limited government.

Harley Shaiken, let’s put our cards on the table first. You don’t see public-sector employees as being overcompensated, right?

HARLEY SHAIKEN, University of California, Berkeley: Absolutely not.

And I think there’s ample data that indicate that they are not overcompensated. The average public worker in the United States earns about $49,000. But when you adjust for, as you put it earlier, education, experience, the character of the job, public workers earn — their wages are 11 percent less than those in the private sector.

If you add all the benefits into that picture, they’re 7 percent less. That’s hardly overcompensated. Are there cases in some occupations, some states where they are? Perhaps. But I think, overall, they are paid less than their private-sector counterparts, and the state really is a place where those who earn least ought — the state ought to be setting the standard for better pay, not for sweatshops, even within the constraints of a very serious fiscal situation on a state level.

JEFFREY BROWN: All right. All right. We’re going to walk through some of those.

But, Chris Edwards, first, your cards here. You see an unhealthy balance in the — how the public sector employees are compensated.

CHRIS EDWARDS, Cato Institute: I think, for state and local workers, their wages on average across the country are pretty well in line with the private sector. Teachers and police and fire, the academic studies I have seen, the wages are pretty reasonable and competitive.

It’s the benefits where the state and local workers have a huge advantage. And to give you a couple examples, virtually all full-time state and local workers get old-fashioned defined benefit pension plans that are typically very generous. Private-sector workers, very few of them get these defined benefit pension plans anymore.

So these government pension plans are far more lucrative generally than private sector 401(k) plans. Secondly, virtually all full-time state and local workers get retiree health subsidies. So, the typical worker state-local retires at, say, age 55 or 56. Then they get 10 years of health care subsidies before the federal Medicare kicks in.

That’s the type of benefits that people in the private sector simply don’t get. And finally, as your piece pointed out, public-sector workers get a lot more job stability. They have huge job stability, which has a value. So, a private sector teacher earning $40,000 and a government teacher earning $40,000, they’re not exactly comparable, because the government worker has a much more stable job.

JEFFREY BROWN: All right, well, Harley Shaiken, that puts a few things on the table there. But start with the pensions-vs.-401(k) issue, that — that part of the benefits.

HARLEY SHAIKEN: Well, I think Chris is raising some legitimate points here. Government workers tend to have more defined benefit plans, meaning you know what you’re getting in that check at the end of the month.

But we have to come back to the overall cost of all of this. The overall cost can be summarized in one figure. When you adjust for education, experience, the character of the job, it is 7 percent less the cost to taxpayer, 7 percent less than comparable work in the private sector.

JEFFREY BROWN: What does that…


JEFFREY BROWN: Harley Shaiken, I’m sorry to interrupt you, but what does that mean to adjust for education, for example?

Use the education as a way of explaining this. Help people understand.

HARLEY SHAIKEN: Well, it means that, for example, in the public sector, workers, on average, have — 54 percent of them have bachelor’s degrees or advanced degrees. In the private sector, it’s something like 34 percent.

Historically and today in the private sector, those kinds of educational qualifications result in higher pay. So, when you compare public- with private-sector workers, you have got to take into account that so many more public workers — in Wisconsin, for example, it’s double the percentage of the private sector — have this advanced education. Therefore, they’re going to be earning more in a comparable job.

JEFFREY BROWN: All right, let’s just stay on the education, the role of education level. Does that sound right to you? What do the studies tell us here?

CHRIS EDWARDS: The — when you adjust for education and experience and all that sort of stuff, some of the studies show that the state-local workers earn a little bit less in wages. Others show that they’re about equal.

So, for example, a “USA Today” study last year on 200 occupations, you know, trash collectors, teachers, et cetera, comparing state and local to private workers, on average, the wages were about the same. It’s the benefits where the real difference is.

And all of — none of these studies take into account the fact that the public-sector pensions and retirement health plans are enormously overpromised or underfunded. All the government data — none of the government data that these studies are based on take into account the fact that the government pensions are about $3 trillion in the hole, and the government health care plans are about $1.5 trillion in the hole.

So, there is a really big problem with these overpromised benefits.

JEFFREY BROWN: Well, Harley Shaiken, what about the current benefits issue, the — where public’s — the health care coverage? Because one of the issues in Wisconsin, of course, is the effort to get public-sector employees to contribute more to their current health care benefits.

HARLEY SHAIKEN: Well, these are very serious issues. And we do have a fiscal crisis on the state level. But we have to put that into a larger context.

That crisis was caused by the collapse of the economy, by the financial sector imploding and the recession that ensued, not by greedy or overcompensated public workers. Going forward, to the extent we have a problem, that’s a serious subject for negotiation between the elected representatives of the people in a state or a municipality and the elected representatives of the workers in that area.

That’s called collective bargaining. Mayor Bloomberg in New York put it very nicely. Where we have a problem, let’s negotiate. So, could we have a problem going forward? Of course. That problem is caused by issues unrelated to the public workers directly. They didn’t get us here. They may have to give something to get us out of here. But that is collective bargaining.

JEFFREY BROWN: Well, so everybody is agreeing we have a problem, whatever caused it. But the question is how do you solve it? And the issue, specific issue here, you’re saying, Chris Edwards, that you can look at the public-sector wages and compensation benefits as a place to cut, because it’s just too much.

CHRIS EDWARDS: Absolutely. I think one of the things that the governor of Wisconsin is doing right is he’s increasing the required worker premiums for the pensions and health care benefits. That will help reduce the long-term unfunded obligations, which would otherwise fall on taxpayers.

Your intro piece did point out something very interesting, which is the states are dramatically different in the level of problems that they face. So, some states, like Wisconsin, Illinois and California, have very high government worker wages and very large pension and unfunded obligations. Other states, like Texas and Virginia, do not very large problems.

And Harley brings in collective bargaining. I have run statistical comparisons and found that the states that have high union shares, high levels of unionization are generally the states that have the biggest pension problems and largest premiums for government workers. So, you know, I think that’s where the unions come into this.

JEFFREY BROWN: Well, that — yet another large issue, Harley Shaiken, when we’re looking at the historical nature of all this. We just have a minute. So — so, respond to that.

HARLEY SHAIKEN: Well, I think that Chris is raising some points, but he’s — he has the causality wrong.

In unionized states, we can point to unionized states where they are doing very well in the current crisis. We can point to states without collective bargaining where they’re collapsing. The key here is that unions give us the ability to adjust to this in a fair and equitable way going forward.

As one nurse’s aide in Wisconsin put it, government jobs are the jobs my children might want some day. Unions are a vital part of ensuring that there are decent jobs, that they attract the best to teach our children, to fight fires, to provide security in our cities. So, these aren’t trivial issues.

And the data does show, in fact, that there is no relation between the worst collapses in the states today and whether or not they’re unionized.


HARLEY SHAIKEN: Unions are part of the solution getting out of this, not part of the problem.

JEFFREY BROWN: Very brief last word here.

CHRIS EDWARDS: A dozen states do not have unions in the public sector, including very well-run states like Virginia. So, I think unions often stand in the way of reforms, and you don’t — we don’t need them in the public sector.

JEFFREY BROWN: All right. We promise to continue this debate.

Chris Edward, Harley Shaiken, thank you both very much.