Tag: employee compensation

It’s Fall in Washington and the Livin’ Is Still Good

Drawing on new census data, Newsweek finds that seven of the 10 richest counties in America, including the top three, are in the Washington area. Newsweek’s former sister publication, the Washington Post, summarizes the data. Only three counties in the United States have a median household income over $100,000, and they’re all Washington suburbs.

As we’ve reported here before, these trends began even before the Obama administration started concentrating job creation on the federal sector. In the middle of the Bush bubble, the Washington Post reported:

The three most prosperous large counties in the United States are in the Washington suburbs, according to census figures released yesterday, which show that the region has the second-highest income and the least poverty of any major metropolitan area in the country.

Rapidly growing Loudoun County has emerged as the wealthiest jurisdiction in the nation, with its households last year having a median income of more than $98,000. It is followed by Fairfax and Howard counties, with Montgomery County not far behind.

This of course reflects partly the high level of federal pay, as Chris Edwards and Tad DeHaven have been detailing. And it also reflects the boom in lobbying as government comes to claim and redistribute more of the wealth produced in all those other metropolitan areas.

To slightly amend a ditty I posted a few years ago,

Mamas, don’t let your babies grow up to be cowboys,

Don’t let ‘em make software and sell people trucks,

Make ‘em be bureaucrats and lobbyists and such.

Federal Government Is a Lucrative ‘Industry’

The Bureau of Economic Analysis latest release of industry compensation levels shows that the average federal worker ranks up at the top along with employees in the finance and energy industries. That’s not exactly popular company these days.

The BEA presents compensation data for 72 industries that span the U.S. economy. Figure 1 shows the 20 industries with the highest levels of average compensation, which includes wages and benefits. It also shows the average for all U.S. private industries and the average for the industry with the lowest compensation. (The names of the industries have been simplified in some cases).

Federal civilian workers have the sixth highest average compensation of the 72 industries:

As yesterday’s post showed, federal employee compensation has exploded over the course of the decade. Figure 2 shows that this federal employee compensation growth has been the fifth highest of the 72 industries measured by the BEA:

Federal Employees Continue to Prosper

The Bureau of Economic Analysis has released its annual data on compensation levels by industry. The data show that the pay advantage enjoyed by federal civilian workers over private-sector workers continues to expand. This state of affairs is a thumb in the eye of the private sector, which continues to struggle with high unemployment. Many private sector employees have been forced to take pay and benefit cuts while continuing to fund generous federal employee compensation with their taxes.

Figure 1 looks at average wages. In 2009, the average wage for 1.95 million federal civilian workers was $81,258, which compared to an average $50,462 for the nation’s 101 million private sector workers (measured in full-time equivalents). The figure shows that the federal pay advantage (the gap between the lines) continued its steady increase over the past decade.

Figure 2 shows that the federal advantage is even more remarkable when worker benefits are included. In 2009, federal worker compensation averaged a whopping $123,049, which was more than double the private sector average of $61,051.

The disparity between average federal and private employee compensation has risen dramatically over the decade: from 66 percent in 2000 to 101 percent in 2009. Defenders of generous federal employee compensation point to the higher levels of education in the federal workforce. However, it’s doubtful that education accounts for the growing disparity between federal and private compensation.

Figure 3 shows that federal employees also enjoy much greater job security (data is from Table 18 here). In 2009, a private sector employee was more than three times more likely to be laid off or fired than a federal employee.

A good indicator of the adequacy of federal compensation is the quit rate. Figure 4 shows that in 2009, private sector employees quit at a rate that was more than eight times higher than federal employees (data is from Table 16 here). This indicates that federal employees recognize that the generous combination of wages, benefits, and job security is hard to match in the private sector, so they stay put.

State Budgets and Employee Compensation

Today, Cato released a report on employee compensation in state and local governments. As states struggle to balance their budgets in coming months, they should look to find savings in employee compensation, which represents half of all state and local spending.

The particular issue of excessive state pensions is being probed by newspapers across the nation. Over at Reason, Nick Gillespie discusses the problem in his home state of Ohio. That state’s newspapers teamed up to pen a series of articles on government pensions, which are representative of the growing pension problems in many states.

There has been a parallel series of articles across the nation on “pay-to-play” state pension scandals. These scandals involve Wall Street firms bribing public officials to get a slice of the government’s financial business. There is pay-to-play corruption in California and pay-to-play corruption in New York and many other places.

The solution to both of these problems is the same: moving the nation’s 20 million state and local workers from defined-benefit to defined-contribution pension plans. That way, governments wouldn’t have to hold giant pools of pension investments, the benefit structure of government workers would be more transparent, and policymakers could more easily cut compensation to balance state budgets.