Watching the Watchmen, Continued

by Daniel Foster

Tim Fernholz at American Prospect and Jonathan Cohn at The New Republic have offered lengthy responses to my article on police and fire compensation. A few issues:

1) I was pleased to see Cohn write this (emphasis added):

Whether or not reducing pay of first-responders is the right thing to do, it may be the necessary thing to do. Local and state governments simply don’t have the money the need to meet their immediate needs and, in the long term, they haven’t planned adequately for future obligations in the form of retiree health benefits and pensions. Precisely because public safety is so important, across-the-board reductions in compensation will frequently make more sense than layoffs. Unions that refuse to consider that possibility do their members, and their communities, a disservice.

I also think there are elements of truth in Foster’s broader critique. Police and firefighter unions have a lot of power. Like any other organized political group, they exploit emotions when they can. Sometimes individuals, locals, and larger union organizations use those advantages to secure excessive compensation or even to commit outright fraud.

But both he and Fernholz take issue with my reference to the 34 percent compensation gap in favor of public over private sector employees, and my singling out the great disparity between police compensation and median family income in Oakland. Cohn quotes Fernholz:

To be more specific, Foster writes that “average total compensation for an officer in Oakland –a city in which the median family earns $47,000–is $162,000 per year.” But there’s a difference between total compensation and income–the former includes benefits. Assuming 70 percent of that is salary–which is high, since as we’ll see, local officials tend to back-load compensation to make their budgets look stronger–a better, if very rough, comparison is the median income plus hypothetical benefits of $67,000 to $162,000. That’s still a big difference, but when you factor in that the average officer pay will skew a small sample higher due to a few highly paid police department executives–and that being a police officer requires special skills and training, terrible hours, and dangerous duties–it seems much less outrageous.

It’s true that comparing median family income to average total compensation isn’t apples-to-apples, for the above and still other reasons (median versus mean, family versus individual etc.). So I’m happy to yield that. But I wasn’t trying to compare them apples-to-apples. I mention the median family income — inside EM dashes — to establish that Oakland is not, in general, a well-off place. I later reference the astounding figure that first-responder costs account for some 75 percent of Oakland’s general fund expenditures. It’s the combined context of a city with a relatively modest tax base that is already dedicating the lion’s share of its tax revenue to emergency services that is meant to make that $162,000 figure stick out.

Cohn quotes a commenter at another blog, a self-described pension actuary who makes the unhelpful argument that police pensions are only “expensive” because they are underfunded by short-sighted politicians anxious to cut taxes. Certainly it’s true that years of kicking pension payments down the road have contributed to the manifold of crises across state and municipal governments.

But the size of the hole is generally proportional to the size of the doughnut, and the sheer magnitude of governments’ pension commitments is surely as salient as the underfunding of same.

Yet we hear no mention of the rapidly escalating health-care costs associated with generous public employee plans (the kind of plans whence the “Cadillac” moniker came); of the precariousness of the “defined benefit” structure; of the nefarious and widespread practice of “pension spiking,”* and so on. We hear only about how dangerous and irresponsible it is to cut taxes.

2) Both Fernholz and Cohn reference the argument that the public-private compensation disparity isn’t so great when one controls for education and experience. This argument has always bugged me. And while I haven’t buried my head in the relevant books enough to counter it substantively, here is, at least, an “irritable mental gesture.”

Folks like teachers and cops often earn more for getting advanced degrees, not necessarily because they get better at their jobs, but because that nexus is enshrined in their collective bargaining agreements. Many public sector contracts subsidize higher education, and nearly all of them pin salary increases to the attainment of more and more sheepskin. So the fact that better-paid public sector employees often have richly-filigreed diplomas from Hollywood Upstairs Public Safety College doesn’t tell me they’ve increased their real labor value.

If anything, my anecdotal experience as a reporter covering the cop shop and school boards in a machine state like New Jersey has shown me that many of these individuals have been educated beyond their intelligence. In the world of secondary education, for instance, Ed.D.s are mailed out with laundry detergent samples.

Paranoid as it may sound, all this really tells me is that there is an awful lot of one-hand-washing-the-other going on between two reliably Democratic voting blocs. Both unions and universities are by their nature liberal institutions; but institutions are by their nature conservative. 

3) Cohn makes a fairly widespread progressive assumption about compensation explicit:

How much would somebody have to pay you to run into a chemical inferno? To stand down a gun-wielding criminal? To infiltrate a drug gang? If I was going to write an article about the compensation for firefighters and police officers, I might ask those questions and dwell on them for a while.

. . .

I realize that, as a general rule, our economy doesn’t do a good job of matching compensation and social value. If it did, teachers and nursing home workers would make a lot more. But that gets back to my original question. Is that a good thing? I don’t think so. And if first-responders are the relative exception to that rule–i.e., if they have compensation closer to our best paid professionals–I really don’t mind at all.

You know what does a good job of matching compensation to value? Markets. You know what collective-bargaining agreements really distort? Markets! I had this argument again and again with a dear friend who is conservative on many issues, but who, as a teacher, has called down all manner of plagues on Governor Christie.

“Rod,” I’d say. “You’re a great teacher! You should be making more than what you do. And an awful lot of mediocre teachers should be making a lot less.”

Mutatis Mutandis: Good cops should make what they’re worth. But we have no way of knowing what they’re worth when they are locked into inviolable pay-scales and a “last-in, first-out” structure that lays-off the youngest (cheapest) officers, and protects union incumbents without respect to, you know, whether or not they are worth a damn as cops.

4) Finally, Fernholz worries “that recent criticism of public-sector unions is not really about fiscal responsibility but about whether workers have a voice in the terms of their employment.”

I’ll speak for myself here, but I think collective bargaining has a place where workers are so weak and employers so strong that it distorts the labor market.  The argument of my piece is that just the opposite is the case with police and firefighters. Both our cultural norms and the institutional power of public sector unions makes their compensation a sacred cow, to our detriment.

Also — and I admit, I thought this would stir the last vestiges of anti-establishmentarianism in the cockles of my liberal friends’ cold hearts — these are agents of the state, with guns.

In one town I covered, whenever the mayor and council were discussing police salary, virtually every officer in the department — on duty and off, minus a token desk sergeant to man the station — would show up in full battle dress and form a blue wall at the rear of the chambers, Glocks at their hips.

The message couldn’t have been clearer.

UPDATE: At AEI, Andrew Biggs addresses a lot of these issues here, here, and here, in ways that have very much informed my thinking.

*Fernholz does mention “the structural issues that incentivize back-loading public-employee compensation and contribute to the serious problem of underfunded pensions,” but seems to suggest, like Cohn, that appropriators bear the burden of the responsibility.