Monday, December 17, 2018

Overpaid public-sector employees - By Chriss Street

The U.S. Bureau of Labor Statistics reported that state and local government employee total compensation is now 47 percent higher than for private-sector employees.
Total compensation for federal, state, and local government employees cost taxpayers $1.9 trillion in 2016, or about $15,176 per household.  Although a 2010 study by the Bureau of Labor Statistics (BLS) found full-time private industry workers worked an average of 12 percent more hours per year than state and local government workers, private-sector workers on average make less in every category.
Most Americans are under the impression that the $50.03 average total hourly compensation for state and local employees versus the $34.53 an hour for private-sector employees is due to public-sector defined benefit pension costs.
BLS hourly data reveals that state and local government employees receive $18.80 in benefits compared to $10.48 for the private sector, a spread of $8.32 or 79 percent more.  But state and local employee hourly wages and salaries average $31.23 versus $24.06 for private-sector employees, a spread of $7.17 or 30 percent more.  That means that public-sector paychecks are also 29 percent higher than private-sector paychecks.
When confronted with the fact that public-sector workers make tremendously more than the average working taxpayer, progressives claim that the lower private-sector worker "average" hourly wages and salaries are due to businesses paying their top 10 percent of executives disproportionally more than public-sector managers to do similar work.  But the BLS reported that per hour wages and salaries for the top 10 percent of state and local employees were $53.54 versus $45.08 an hour for the top 10 percent for the private sector, a spread of $8.46 or 16 percent bigger paychecks for public-sector managers.
The highly lucrative pay for public-sector workers comes despite state and local governments' near-death experience during the 2008 to 2012 "Great Recession."  The Brookings Institution found that during the first 18 months of recession, state income tax collections plunged by 27 percent, and total state tax collections tanked by 17 percent.
The American Recovery and Reinvestment Act of 2009 directed about $145 billion in federal cash to state and local governments for general fiscal relief.  But despite the largest government bailout in history, the Obama administration saw just 2 percent annual economic growth from the bottom of the recession in mid-2009, the slowest economic expansion on record.  As a result, Pew Research analysis demonstrated that after inflation, only 34 states' revenues have recovered from recession levels. 
Moody's Financial Services warned that state and local government credit ratings are still lower than before the recession.  Furthermore, the "new normal" is expected to be "uneven economic recovery and tepid growth, rising deferred maintenance, higher fixed costs, and changing demographics as populations age or relocate."
State and local spending of $3.8 trillion this year is rapidly approaching the $4.4 trillion in federal spending. The risk of default for the federal government is very low, due to Congress's right to pass deficit budgets and print unlimited amounts of dollars.  But almost all states require their municipal and local entities to pass balanced budgets.
The BLS analysis of state and local governments' highly inflated wage structures coincides with the release of Duke University's year-end CFO Global Business Outlook that found that after a near-decade-long burst of global economic growth: "Nearly half (48.6 percent) of U.S. CFOs believe that the U.S. will be in recession by the end of 2019, and 82 percent believe that a recession will have begun by the end of 2020."
If the coming recession is like the 2008-2012 event, annual state and local tax revenue might fall by about $1 trillion in the first 18 months of the downturn.  Congress has the authority to pass another multi-trillion-dollar ARRA bailout, but the probability of such action is low after President Obama's 2009 state and local government rescue contributed to the Democrats' 2010 epic loss of seven Senate seats and 65 House seats.