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March 22, 2012

The Gap Between Public Pay and Private Sector Pay, Illustrated

Each quarter, the BLS releases the Employer Costs for Employee Compensation report. This reports details the average cost, per hour, of employees across various demographics of American employment. Two numbers that I've decided to focus on are total compensation for private employees and total compensation for public employees.

As shown from the above chart going back ten years, there is a massive disparity between the pay of public and private employees. More interestingly, the pay gap in percentage, has changed over the past 10 years.

It is evident that the state and local governments participated in the gluttony of the housing bubble and the pop of that bubble brought government pay closer to parity with the private sector. It's clear from the behavior of these two variables that state and local government officials are overpaid.

The solution to this problem isn't for the private sector to "catch up," it's about making the cuts necessary to bring government pay to more reasonable levels. This is clearly another example of legislators abusing other people's money. Remember, this is a problem we are all paying for!

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