Federal Pay: Response to the Critics

My post yesterday on federal worker pay generated a large and aggressive response from federal workers, both in my inbox and on websites such as Fedsmith.com. (See also Federal Times and Govexec). Here are four points raised in criticism:

First, people accuse me of producing distorted data somehow. Actually, it’s essentially just raw Bureau of Economic Analysis data, but the data is usually overlooked by the media because I don’t think the BEA puts out a press release on it. Anyway, the average wage data is from BEA Table 6.6D. The average compensation data is simply total compensation (Table 6.2D) divided by the number of workers (Table 6.5D).

Second, people argue that reporting overall averages for wages and compensation is somehow illegitimate. People email me comments like “my federal salary is only $50,000, yet you claim that federal workers make $79,000.” All I can say to folks like this is that there must be a federal worker out there making $108,000 who balances you off.

Third, people argue that a better analysis would be to compare similar jobs in the private and public sectors, rather than looking at overall averages. I agree that that would be very useful. Unfortunately, the BEA data is not broken down that way. At the same time, the BEA data provides the most comprehensive accounting for the value of employee benefits of any data source. Benefits are a very important part of federal compensation, and so that’s why I look to the BEA data.

Fourth, many people argue that the federal government has an elite workforce with many highly educated people. Certainly, that’s an important factor to consider. However, that is the reason why I focused on the pay trend over the last eight years. The federal worker compensation advantage rose from 66 percent in 2000 to 100 percent in 2008. Has the composition of the federal workforce really changed that much in just eight years to justify such a big relative gain? I doubt it.

A final consideration is to look at a “market test” of the adequacy of compensation in the public sector–the quit rate. The voluntary quit rate in the federal government is just one-third or less the quit rate in the private sector (Table 16 near the bottom here).

That is strongly suggestive of ”golden handcuffs” in federal employment. While many federal workers probably grumble about their jobs (as many private sector workers do), they know that the overall package of wages, benefits, and extreme job security (Table 18 here) is very hard to match in the competitive private market, and so they stay put.

U.S. to Share Biometric Data With Foreign Countries

In the name of fighting identity fraud, the U.K. Home Office has entered into a biometric data-sharing agreement with Canada and Australia.

“The USA will be joining the agreement shortly, and New Zealand is considering legislation to join in the near future,” they say.

It would be nice to learn what commitments have been made to the U.K., justifying this statement.

LA School District Vote Shows Further Cracks in Education’s Berlin Wall

America’s large urban school districts are often the lowest performing, least efficient, and most resistant to change. The poster children for this reality are perhaps Detroit and Washington, DC, but the Los Angeles Unified School District (LAUSD) has long been in the running as well.

Yesterday, there was a sign that LAUSD would like to get out of that race for the bottom: the district’s school board voted 6 to 1 in favor of a plan that would hand up to a third of its public schools over to private management. Ignoring for a moment the question of how well this policy will work, it is categorically, undeniably, a sign of change. In the past, such private contracting arrangements in large districts have usually been the result of state or mayoral takeovers. This is the first case that comes to mind in which the plan was the product of an elected school board that has just had enough with its own administrators’ unsatisfactory performance.

Keep in mind that school board elections suffer low-turnout, and that support for candidates is dominated by public school employee unions looking out for their own members’ salaries and job security. If THAT process can produce such a clarion call for parental choice, competition, and diversity in educational provision, times ARE changing.

Now let’s stop ignoring the question of whether or not it will work. There’s not a whole lot of research on the subject. The most recent and detailed review of a similar contracting-out arrangement in Philadelphia, by Harvard’s Paul Peterson and Matthew Chingos, finds that non-profit management organizations in the city underperformed the district somewhat in reading and math, though the reading difference was statistically insignificant. The same study found that for-profit management organizations outperformed the district in both subjects, though the reading difference was again statistically insignificant.

Honestly, though, I don’t think anyone believes that the LAUSD plan was the result of a painstaking comparison of all the policy options and the choice of the one most supported by the empirical research. It is a cry of frustration with the status quo, and an implicit recognition of what most people already know: monopolies are bad at giving consumers what they want at a reasonable cost; choice and competition drive up quality and drive down costs in every other field, so why not bring them to bear in education? And finally, the LA school board’s action represents a desire to get something done NOW, that is actually within the board’s power to accomplish.

My sympathies are with the board members who are trying to make a positive difference within the system we have, but the question for voters and legislators is: why stick with the status quo at all? Why not open up the field of education to all the freedoms and incentives of the free enterprise system, rather than trying to cobble together a pale, ad hoc immitation of it? Because what the massive body of international scientific evidence shows is that the freest, most market-like education systems are the ones that outshine public school systems by the greatest margins.

A New Book from David Boaz? Tax Tips for Democrats

Okay, well maybe Tax Tips for Democrats won’t ever make it to the publisher, but while speaking at Cato University this summer, David Boaz offered a few tips to any more Democrats with tax problems who are thinking about joining the current administration.

“Some people say the best thing about electing a Democratic president is all the back taxes we collect from their appointees,” says Boaz. “It helps to balance the budget.”

Watch the whole thing:

C-SPAN 2 will air Boaz’s talk on the state of freedom in America this Sunday at 11:30 AM EST.

Have Mexican Dishwashers Brought California to Its Knees?

workerAn article published this week by National Review magazine blames the many problems of California on—take a guess—high taxes, over-regulation of business, runaway state spending, an expansive welfare state? Try none of the above. The article, by Alex Alexiev of the Hudson Institute, puts the blame on the backs of low-skilled, illegal immigrants from Mexico and the federal government for not keeping them out.

Titled “Catching Up to Mexico: Illegal immigration is depleting California’s human capital and ravaging its economy,” the article endorses high-skilled immigration to the state while rejecting the influx of “the poorly educated, the unskilled, and the illiterate” immigrants that enter illegally from Mexico and elsewhere in Latin America.

Before swallowing the article’s thesis, consider two thoughts:

One, if low-skilled, illegal immigration is the single greatest cause of California’s woes, how does the author explain the relative success of Texas? As a survey in the July 11 issue of The Economist magazine explained, smaller-government Texas has avoided many of the problems of California while outperforming most of the rest of the country in job creation and economic growth. And Texas has managed to do this with an illegal immigrant population that rivals California’s as a share of its population.

Two, low-skilled immigrants actually enhance the human capital of native-born Americans by allowing us to move up the occupational ladder to jobs that are more productive and better paying. In a new study from the Cato Institute, titled “Restriction or Legalization? Measuring the Economic Benefits of Immigration Reform,” this phenomenon is called the “occupational mix effect” and it translates into tens of billions of dollars of benefits to U.S. households.

Our new study, authored by economists Peter Dixon and Maureen Rimmer, found that legalization of low-skilled immigration would boost the incomes of American households by $180 billion, while further restricting such immigration would reduce the incomes of U.S. families by $80 billion.

That is a quarter of a trillion dollar difference between following the policy advice of National Review and that of the Cato Institute. Last time I checked, that is still real money, even in Washington.

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