Wednesday, August 11, 2010

Federal Workers Benefits Now Approaching Parity with Wages in the Private Sector

Please re-read that headline so you don't misread it by skimming.  We have reached the point where BENEFITS (not wages) for federal workers is fast approaching WAGES of the private worker.

Again before we move one step forward let's emphasize what we see... BENEFITS for the federal worker average $42K.  WAGES for the private sector worker average $50.5K.   With inflation in healthcare (8-10%+ many years) I expect these two trendlines to cross within 5-7 years.

Is there any surprise the wealth of the nation has moved to the counties around Washington D.C.?  [Mar 11, 2010: America's 3 Wealthiest Counties Now Ring Washington D.C.]

Long time readers know I've been far in advance on this subject versus the mainstream press; indeed saying this will become one of the main social stresses in American society as globalization continues to attack the private sector, while the public lives in a parallel universe.  We said the states - dependent on bubble levels of real estate and spending like there is never a rainy day would be facing problems long before it was fashionable.   [Dec 16, 2007: California in a State of Fiscal Emergency - Coming to a Theater Near You]  Indeed even with the worst recession since the Great Depression, it took some 18-24 months before any stresses developed in the public sector - and almost all of that is at the city and state level, due to the need to balance budgets.  At the federal level there is no such need, hence a superstar caste has developed in the U.S.

Now to be fair, I would say some small portion of federal government worker is UNDERpaid versus their private sector peers, especially those who direct large departments.  And a much larger % of the private sector (vs public) is lower paid blue collar and/or "grunt service work" so that skews a 40,000 foot view analysis.  But in the past year other stories have compared apples to apples, showing a large discrepancy in nearly identical jobs (i.e. accounting) between public v private.  And that was in wages alone, before the benefits came into play.

This dichotomy can continue for a very long time because the federal government worker will never see pay/benefit pressure until the U.S. itself faces debt issuance problems.  It is not like federal government work will ever be outsourced to India hence the global wage arbitrage issue we have in the private sector will never be an issue in the public.  As for the local and state level we are now passing out annual "stimulus" (just don't call it that... it's now technically named 'jobs programs') to make up the shortfalls & compensate for a complete mismatch of revenue vs expenditures.  Aside from stimulus ... excuse me, "job bills"... the dirty secret is even the majority of the states balancing their budget are either not contributing to their pension funds, or underfunding them (see New Jersey for example - a state who is actually making tough decisions).  We all know where this leads - after kicking the can for many years... in due time, the U.S. taxpayer will be asked to pony up to fund a bailout for pensions for the public sector.  [Jan 5, 2010: - US Public Pensions Face $2 Trillion Deficit]

This is old hat for long time readers of FMMF, but judging by the comments section in these newspaper stories it seems more and more Americans are discovering this issue for the first time.  As the economy has years of "meh" ahead of it, I expect it to raise more and more ire as the dichotomy only grows.  Ironically of all papers, USA Today has been leading the charge with multiple stories the past 6 months - you'd think a far more erudite newspaper would be doing the dirty work.

(p.s. I encourage all public workers to invest in my future fund - this is one class I might need to market to, since they will be one with much more disposable income/savings in the years ahead..  In fact, in my myriad of posts on the subject I have encouraged all readers to guide their children into public work and out of the private sector - one day the Ponzi ends, but until then, we party like Romans.  I don't expect anyone to turn down these lavish packages, the issue is the structure of the system - it's broken.)

Just another day in Ponzidise Paradise.

  • At a time when workers' pay and benefits have stagnated, federal employees' average compensation has grown to more than double what private sector workers earn, a USA TODAY analysis finds.  Federal workers have been awarded bigger average pay and benefit increases than private employees for nine years in a row
  • The compensation gap between federal and private workers has doubled in the past decade.
  • Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation, according to the Bureau of Economic Analysis.
  • The federal compensation advantage has grown from $30,415 in 2000 to $61,998 last year.
  1. Benefits. Federal workers received average benefits worth $41,791 in 2009. Most of this was the government's contribution to pensions. Employees contributed an additional $10,569.
  2. Pay. The average federal salary has grown 33% faster than inflation since 2000. USA TODAY reported in March that the federal government pays an average of 20% more than private firms for comparable occupations. The analysis did not consider differences in experience and education.
  3. Total compensation. Federal compensation has grown 36.9% since 2000 after adjusting for inflation, compared with 8.8% for private workers.

What does an unbiased source say about the subject?

I believe Colleen is using the Stephen Colbert defense... when facts get in the way, dismiss them.

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