Sunday, January 23, 2011

Thought of the day

Now for the thought of the day . . .

We have heard much about how public sector employees should "share" the pain in the current economy. The argument is that because private sector employees are hurting financially then so should public sector employees.

One response is to say this: if public sector employees should "share" the pain with private sector employees when times are bad, then we should agree the principle that public sector employees should "share" the gain with private sector employees when times are good. The argument here is simple. If it isn't fair that only one group feels the pain during times of economic hardship, then it must not be fair that only one group receives the benefits during times of economic growth. Right?

An even better response is to say this: why should public sector employees be treated like private sector employees? For one thing, those who chose to work in the private sector accept a risk. The risk is that one can earn greater wealth in the private sector on average all things considered (with the downside of greater job insecurity). Those who chose to work in the public sector chose a more risk averse career, but with the downside that greater job security does not come with higher occupational income. So each side makes a choice. Those who espouse market principles on why public sector employees should earn less fail to recognize that these same principles entail that the market will produce winners and losers in the private sector. If job and income security is so precious to them, then they should recognize that perhaps they made the wrong choice in entering the private and not the public sector.


meditations71 said...

I seem to recall you posting a similar blog some months ago?

In any case, there are two fundamental problems here: a) average pay in the public sector is less than in the private sector (what it looks like over the much longer term I am not sure, but this indeed became the case in the UK in the last decade or so); and b) the public sector's increase in pay (sharing in the "good times") was much higher as a factor of productivity than in the private sector (productivity somewhat decreased in the public sector but increased substantially in the private sector over the last decade). So the sharing in the gains has already been there, disproportionately so.

It is easy to become blinded by the relatively few cases of top earning people with good benefits packages in the private sector, which obscures the fact that for most the private sector means equal or less pay as compared to the public sector, definitely less job security and generally less pensions benefits, etc.

Alan said...

Thom, I would also note (as a public employee in the University of Wisconsin System) that I and my colleagues have accepted demonstrably below-market salaries year in and year out because the state offered deferred compensation in an excellent pension plan paid for wholly by state funds as well as decent medical insurance paid for by the state as well. In recent years we've been forced to pay part of those insurance premiums, and now, on top of two years of ongoing furloughs that may well be extended another two years, the present Governor wants us to start contributing 5% of salary to our pensions and 12% of our insurance, and he has the backing of the legislature. He constantly remarks that we are "haves" as against the private sector's "have nots". I am furious that the historical context of UW compensation has been lost in the demagoguery of demonizing us as public employees, and as a result I and my UW colleagues face double-digit take-home pay cuts over a four year period. Of course this demonizing rhetoric is excellent cover for all the corporate profiteers that really drive this entire so-called "political process".

Thom Brooks said...

Stefan: I think it is easy for some to be blinded by who counts as part of the "public sector" in the UK. Once the NHS and BBC top brass are removed I would suspect the picture would like quite different, no?

Alan: I agree 100%!

meditations71 said...

I don't have figures at hand, but I suspect that removing NHS and BBC "top brass" would still lower average public sector pay less than removing comparable "top brass" in the private sector (where, at the top, you find the _really_ eye-watering remuneration).

As for Alan's points, I assume the picture may look quite different in the US when it comes to the public v private comparison.