Jason Richwine of the Heritage Foundation and I have done a lot of work comparing public and private sector pay — for instance we’ve examined whether federal employees and public school teachers are overcompensated. In a new paper published by AEI, we look at pay and benefits for state and local government employees in Wisconsin, both before and after Act 10, the reforms passed in March of last year.
It’s often said that public employees receive lower salaries but higher benefits — and sometimes that’s true. In Wisconsin, though, we found that salaries are actually about even between public employees and private-sector workers who have similar education and experience and who work for larger employers.
But public-sector benefits remain a lot more generous than in the private sector. Even after Act 10, which tripled state workers’ health-insurance contributions and introduced co-pays and deductibles, Wisconsin state workers receive a health package worth almost $14,000 per year, double the private-sector average.
Pensions are even more generous. A full-career Wisconsin state employee receives a guaranteed pension benefit worth 60 percent of his final salary, plus Social Security benefits. Before Act 10 most public employees paid nothing for these benefits, while post–Act 10 they now contribute 5.8 percent of pay. But for a private-sector worker to receive the same guaranteed retirement benefits he’d have to save over 30 percent of his salary in a 401(k). The fact that public employees don’t have to save nearly this amount makes their overall compensation package more generous.
Overall, state employees in Wisconsin receive pay about 22 percent higher than similar private employees, down from around 29 percent before Act 10. Pay varies at the local level, but in certain cases — Milwaukee teachers come to mind — the pay gap is even bigger. Wisconsin’s pay reforms have accomplished a lot, but there’s a long way to go before public and private sector employees reach pay parity.