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Are Wisconsin Public Sector Workers Underpaid?, cont’d.



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Ezra Klein has responded to the post in which I argued that the EPI study that claimed to show that Wisconsin public-sector workers were underpaid is unpersuasive:

Jim Manzi has posted a critique of the Economic Policy Institute’s study (PDF) suggesting that Wisconsin’s public-sector workers are underpaid relative to their private-sector counterparts. It basically boils down to the argument that this sort of thing is hard to measure. The study controls for most every observable worker characteristic that we can imagine controlling for.

But my basic criticism was that it fails to control for lots of plausible, commonsense differences. That is, that the study doesn’t control for all the characteristics we can imagine, but rather, some of those for which we happen to have data.

Klein is correct to say that my post “basically boils down to the argument that this sort of thing is hard to measure.” But he then argues that the purpose of the original study was not to demonstrate that public-sector workers are underpaid, but rather to rebut the claim that they are overpaid:

The EPI study is aimed at a very specific and very influential claim: that Wisconsin’s state and local employees are clearly overpaid. It blows that claim up.

That may have been the author’s motivation, but here is the final conclusion of the executive summary of the report:

Public sector workers in Wisconsin earn less in annual or hourly compensation than they would earn in the private sector.

The report makes a positive claim that it has determined a compensation “penalty” for working in the public sector, and repeats it many times.  My argument was that this report does not establish whether or not this claim is true. 

By the same logic, it also fails to “blow up” the claim that Wisconsin’s public workers are overpaid.  The methodology is inadequate to the task of establishing whether these workers are overpaid, underpaid, or paid perfectly. As the last paragraph of my post put it:

I don’t know if Wisconsin’s public employees are underpaid, overpaid, or paid just right. But this study sure doesn’t answer the question.

Statistician and political scientist Andrew Gelman has a very interesting response to my post, in which he agrees that this conclusion “sounds about right,” but cautions that the study is not “completely useless either,” because this kind of adjusted comparison is better than simply comparing raw averages between public- and private-sector workers. I agree with that entirely. But that is, of course, a very different thing than saying that these adjustments create sufficient precision to support the bald statement, made in the report, that the author has analytically established that there is a “penalty” for working in the public sector.



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