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.
you don't need any data, just basic common sense. you ever meet anyone that left a corporate job to make more money working for the government?
Reply to this commentLinkReport AbusePrivate sector employees are due a 'risk premium' in their salary to compensate for the fact their employer is subject to market forces and the inherent risk to companies in the free market 'creative destruction' process. Public sector employees rarely face the same employment risk and are compensated in many cases with traditional defined benefit plans generally no longer available in the private sector. The idea of a 'compensation' penalty for working in the public sector depends on how you measure the intangible of essentially lifetime employment in the public sector. what is that security worth?
Jim, why even engage Ezra? the guy is intellectually dishonest and either willfully ignorant or a liar.
Reply to this commentLinkReport AbuseThey're overpaid as long as the taxpayers think that they are overpaid. End of story. We determine the value we place on public servants, not some fey little boy named Ezra. I really can't believe that some conservatives continue to attempt counterarguments on liberal terms. Stop it already.
I don't usually write like a right wing crank, but like a lot of other conservatives, I am utterly sick of all this.
Reply to this commentLinkReport AbuseCentral-planner progressives always try to fit reality into test-tubes -- but real prices are determined in the marketplace. And in the marketplace of my own life I don't subject my children to the "free" services of government teachers. Instead, I pay after-tax income to a private school -- one that does not (cannot) pay its teachers the same salary/benefits that public school teachers enjoy.
But to this taxpayer, the service provided by the less-credentialed, less-compensated faculty is superior. What more proof do you need than the fact that I forgo the "free" school to voluntarily pay the tuition?
In that light a comparison of even two 7th grade teachers is really apples-to-oranges.
Reply to this commentLinkReport AbuseThe whole discussion of overpaid or underpaid is a mute point, since there is no market to set the price. Comparision to comprabale private school teachers is also invalid as their consumers already pay into the public system which reduces what they might pay into the private system.
Personally, I think teachers in my local area (Huntsville, AL) would generally make more in an all private system. But then, a lot of the teachers would be run out of town in a private system. The Department of Education determined that the driver for the quality differences between public shools can be distilled down to the quality of the parents. Our parents would not tolerate some of the poor teachers that are foisted onto some of the kids in 'bad' districts.
I would have more sympathy if there was pay for performance and the voters got to set the performance critera!
Reply to this commentLinkReport AbuseMr. Manzi,
Reply to this commentLinkReport AbuseIn Illinois the salaries paid to public school teachers have been posted online. When I've compared the salaries of high school chemistry, physics, and mathematics teachers to those of scientists and engineers I work with at a large multinational electronics firm, with comparable educations and years at work, the teachers salaries are comparable or higher. This of course does not include the value (or cost) of the better benefits and job security enjoyed by the teachers. So the "public sector" provides those with relatively uncommon science and math educational backgrounds comparable or even higher salaries and benefits than the private sector.
What's really "out of whack" are the salaries of teachers who majored in English or History, which is determined by years teaching rather than scarcity, and aligned with that of the science and math majors to promote some sort of "we're all colleagues and we all get paid the same" ethos. Ezra Klein should compare private sector salaries for English and History majors with that of teachers, and then he'd see how overpaid many of these "public servants" really are.
I work for small city government and earn a very modest salary, pay a portion of my health insurance premium and 100% of my pension contribution. Given my experience and training, I could earn more and have in the past, both in the private and public sectors. But I knew the conditions of employment before I accepted this job, so I cannot justify protesting those conditions of employment after-the-fact, which is exactly what Ezra Klein is attempting to do on behalf of the Wisconsin protestors.
As folks on the left often do, Mr. Klein shifts the blame for the bad behavior away from the bad guys. The drug addict who bludgeoned to death an elderly neighbor was raised by a single mother in a bad neighborhood. The 9/11 terrorists killed 3000 innocent people because they disliked George Bush's Middle East foreign policy. And teachers call in sick when they're not, carry incendiary signs and pump their fists in the air because they're underpaid and underappreciated. Blah, blah, blah.
Reply to this commentLinkReport AbuseIf it's true that Wisconsin public employees are underpaid, why are they not leaving for higher compensation in the private sector?
Reply to this commentLinkReport AbuseAbe: yes you do (usually write like a right-wing crank!) - and public employees are no more slaves to the voters than any other group of workers is in relation to whomever pays their salaries. The right to organize and engage in collective bargaining is a basic American characteristic, and has been for a long time. That fact isn't "liberal" and ought not be especially partisan, except for the fact that the unions themselves are a Democratic constituency (the Republican party has never been hospitable to working people.) This fight is a purely partisan fight in which state level Republicans are seeking to weaken the opposition by busting the unions. Scapegoating teachers (of all people) is a purely cynical tactic.
Manzi's argument has the problem that it doesn't effectively rebut the contention that public-sector unions don't confer any noticeable premium on public-sector employment. Ezra's framing might be more assertive, but Jim's counter only weakens the point very slightly.
Reply to this commentLinkReport AbuseIf they'd make more in the private sector, let them go and do so.
Governments have completely failed in the education business. Governments have made a mess out of subsidized health care. Recently the congress has turned unemployment into a 3 year hammock instead on a temporary insurance program.
What are we getting for anything we pay for all this state and local government expenditure? Not a darn thing. For a tenth what they spend now we could have decent police and justice, proper government roles, and get the heck out of all the rest of it.
Yesterday.
If these wonderfully gifted and dedicated teachers "would" be chosen by private schools and parents, then they will be. If they wouldn't, then we don't want them to start with.
None of them "deserve" anything and it isn't a matter of statistics. If they are freely paid salaries by for profit employers they can say they have earned their pay. They aren't. So they can't.
Reply to this commentLinkReport AbuseStudies based on analysis of qualifications and other personal characteristics miss the point. Proper, or natural, or correct levels of wages cannot be discovered without workforce fluidity, the constant ebb and flow of employees coming and going, with the numbers each way influenced by compensation and working conditions and myriad other factors.
To this end, we need to reform public sector benefits (retirement and health) to be portable in the same ways that many private sector benefits are these days. For example, modern retirement plans are so constructed that an employee who builds a career at three different companies will get about the same pension as he would have had he stayed at one company the whole time and had an otherwise similar career.
Once golden-handcuff benefit plans are no longer impediments to labor force movement, we will see in the ebb and flow of employees whether the public sector needs to raise compensation or should lower it.
Reply to this commentLinkReport AbuseSo what you're really saying is: There is no evidence for conservative claims that Wisconsin public employees are overpaid.
Reply to this commentLinkReport AbuseAemJeff: You claim Republicans have never been hospitable to "working people" when what you probably mean is Republicans have never been hospitable to working people who belong to unions. Are you suggesting that allowing working people to keep more of what they earn and spend it on what they want to spend it on is inhospitable?
Who says the right to collective bargaining is a basic American characteristic? Most Americans have no involvement in nor benefit from collective bargaining. Collective bargaining is characteristic for those Americans who belong to unions, not all Americans. FDR referred to collective bargaining rights for public employees as "intolerable."
"Scapegoating teachers?" I don't think so. Teachers willingly put themselves in this position when they decided to call off sick and hit the streets to protect that to which they believe they're entitled. Because some of us happen to disagree doesn't transform angry teachers into innocent scapegoats.
Reply to this commentLinkReport AbuseNo, actually conservatives are quite good for workers: by unshackling entrepreneurs new jobs are created and workers can find new paths to advancement. They can even become entrepreneurs themselves (sorry to be repeating myself).
Yeah, the GOP has too often neglected its conservative principles -- but hey, better late than never. If teachers don't like the pay-package on offer they certainly SHOULD have options for alternative careers. And they WOULD if the Dems weren't so dead-set on strangling markets.
So we've got quite a bit of work to do here. Restoring market forces is good for workers. And not just for price discovery.
Reply to this commentLinkReport AbuseKlein is not listening. They have most certainly NOT accounted for every conceivable factor, the most important of which are the Market Risk Premium associated with private sector employement (risk of layoff and zero pay for xxx months) and the Present Value of defined benefit pension payments (zero market risk for the employee) for people who can retire at 50 or 55 (and still work for 15 more years while drawing "retirement") compared to defined contribution 401Ks which are subject to market risk and are generally not accessible until 65.
The fact that public employees are compensated 4% "less" than private sector tells me that they are, in fact, overpaid. Why? Because if I adjust this for the Market Risk Premium of private sector employment and the PV of future, 0% risk, defined benefits, the numbers REVERSE. I can tell just by looking at them.
But that's not the point of this study. The point of this study is to put something out there that most people won't understand...a blizzard of numbers designed to hide the fact that the most important numbers were not included.
Reply to this commentLinkReport AbuseHere's a typical conservative attitude towards civil servants:
"What are we getting for anything we pay for all this state and local government expenditure? Not a darn thing."
When I worked for the state of California, we produced the employment and unemployment rates for the state, as well as other employment statistics. I suppose most conservatives believe that everything government employees do is useless. OK, let's never give you any data concerning employment and unemployment.
Like that?
I used to work for the Department of Health. I worked in a unit that inspected nursing homes. Want to eliminate that? How about health statistics? I worked there too.
Finally, issuing unemployment checks. I suppose you want that canceled as well.
Reply to this commentLinkReport Abuse"Abe: yes you do (usually write like a right-wing crank!) - and public employees are no more slaves to the voters than any other group of workers is in relation to whomever pays their salaries."
First of all, most of us consider a right wing crank to be someone who indiscriminately attacks anyone on their own side who offers a different perspective. We're pretty much unified in our blistering contempt for the left however differently people choose to express it. As to the remainder of your comment, are you so dim as to suggest that your hollow assertion is of a factual nature, and hence needs rebutting on its own terms? I like my assertion better than yours.
Reply to this commentLinkReport AbuseA person is overpaid if there is someone as qualified to do the job who who would do the job for less. That is true for both the private and public sectors.
Reply to this commentLinkReport Abuse@Abe
You've certainly proved my initial assertion!
Reply to this commentLinkReport AbuseJenna, if you're against allowing workers to organize such that that they have enough power to effectively bargain in their own interest, then you've taken a stand against working people. Unions made the difference between workers as chattel and workers as effective citizens of the Republic, which explains why it's an American characteristic. Your assertion in regard to teachers is tendentious and unfounded. They have the same right to protest as every other citizen, and there's nothing distinctive about this protest.
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