“It’s The Law Of Averages” – Public Versus Private Compensation

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The recent Republican talking point claiming that the average compensation of public employees exceeds that of private employees reminds me, strangely enough, of a free rock concert in 1970 at the Bandstand in Kapiolani Park, an emerald expanse of grass and ironwood trees nestled between Waikiki Beach and Diamond Head. In those days such concerts would attract not only the local teens, but also the mentally ill homeless folks who found refuge in the park. One such man, I recall, was staggering around with a wine bottle, chanting – in a hoarse, croaking voice – one phrase over and over again, for hours on end: It’s the law of averages. Lord knows what (if anything) he was referring to, but it’s equally hard to know what the Republicans are referring to. After all, averages are among the most potentially misleading statistics to cite in any debate. If Bill Gates lived in a penthouse on a city block whose only other residents resided in a homeless shelter, the average income of the folks on that block would be in the tens of millions of dollars – obviously, a misleading statistic.

I’ve been unable to find any comparison of public versus private compensation that effectively controls for such variables as education, time on the job, type of work, productivity, and so on. This is partly because the types of work you find in the public sector – police, fire, road maintenance, political – have no exact counterparts in the private sector. Of course, there are sub-sectors of the economy where there are clear counterparts, such as University-level education, and here there seems to be no doubt that private sector compensation exceeds what you typically find in the public sector. But, just for the sake of argument, let’s suppose that public sector employees do indeed earn more than their closest private sector counterparts. The Republicans seek to stir up resentment at the public sector employees for this supposed fact; after all, they say, the less-compensated folks pay the salaries of the better-compensated folks via taxes (failing to note, of course, that low-income workers, whether public or private, pay relatively little in State taxes, and that, in any case, public sector workers are also taxpayers). But such resentment would be justifiable only if private sector employees were themselves getting fairly paid, relative to the profitability of the companies that employ them; otherwise their resentment should obviously be aimed at the bosses of those companies, since they – and not public service employees – would be responsible for the inequality. And are private sector employees being fairly compensated? If they were unionized, the fairness of their compensation given their companies’ profitability might be assessable; but only 7% of private sector employees are currently unionized, and without a collective bargaining process that allows workers to access the company books, it seems impossible to know. So instead of resenting public sector employees for their higher compensation (if it is higher), perhaps private sector employees should unionize in order to determine for themselves whether they are being fairly compensated, and, if not, remedy their own situation.

While I’m ranting on this subject, it’s worth noting that States without collective bargaining are having to deal with deficits every bit as high (or even higher!) than those with collective bargaining – just look at North Carolina, a “right to work” State that faces a budget shortfall of 20% in 2011, versus Wisconsin’s 14.1%. And that is because the States’ recent financial problems are due to the Great Recession of 2007-2009, which almost no one foresaw, and not primarily public sector compensation. So now the unions are going to have to adjust to the new financial realities, as the Wisconsin public sector unions have agreed to do. Perhaps they should also adjust tenure and seniority policies for teachers and others. If necessary, laws could be passed to enforce these adjustments. Local governments no doubt will require more flexibility until the economy picks up. But none of this entails that public sector employees should permanently give up their right to collectively bargain.

Finally, if there are virtually no checks on the public unions’ bargaining power (as Republicans keep asserting), then why aren’t public sector employees all millionaires? Part of the reason is that in many states, including Wisconsin, public sector unions have always been prohibited by law from striking. So they already have much less power than private sector unions. But more importantly, politicians’ interest in keeping taxes reasonable keeps public sector compensation at least roughly under control, and will continue to do so.

The issues related to power asymmetries in the workplace are the same in the public and private sectors; employers and employees will always need to have their interests coordinated. But the best way to do that is via collective bargaining and, if necessary, enforced arbitration – not by denying employees the right to organize.

3 thoughts on ““It’s The Law Of Averages” – Public Versus Private Compensation

  1. Thanks Noah. I think I’m done sermonizing on this issue for a while; I just wish the media was better at pointing out the inconsistencies and fallacies in the Republican position on this.

  2. Me too. I was just saying to my wife yesterday that I wish more journalists had studied formal logic. :-)

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