How Relevant is the Crescendo Study on State Pay?
Douglas Rooks in the Sun Journal recently did a story about a study commissioned by Maine State Government to look into pay disparities between state workers and private sector workers. The study concluded that state worker compensation (wages and salaries plus benefits) are lower than their private sector counterparts. However, there are severe limitations in the scope of this study that cast doubt on its purported conclusions.
- Proponents of the Crescendo study lead you to believe it covers everyone in the private sector. Yet, that is not the case. First, the survey focused only on companies with more than 100 employees. According to data from the Maine Department of Labor, companies with more than 100 employees only constitute 34 percent of all employment in the state. Second, for jobs that had no private sector counterpart, they were compared to jobs in the government sector in New Hampshire and Vermont. Third, there were approximately 100 municipalities in the survey.
- Proponents of the Crescendo study lead you to believe the results are iron-clad. Yet, keep in mind that this was a voluntary survey with all the reporting inaccuracies that go along with such methodology. For instance, the national Consumer Expenditure Survey has been plagued for years with folks reporting higher expenditures than income. Surveys are imprecise. Also, the response rate per position examined was very low–half had 10 or fewer. This means a few companies may have had too much influence on the comparisons.
- Proponents state that the Crescendo study is a new and better way to make private/public compensation comparisons. In fact, studies like this are appearing all over the country and their flaws are being duly noted. In particular, Andrew Biggs at the American Enterprise Institute has challenged these studies on a number of grounds. In a study looking at California, he found:
Whether public-sector employees receive above-market compensation is an empirical question that demands a thorough accounting of wages, benefits, and job security. In the case of California public employees, wages are slightly lower in the public sector. Initially, benefits appear only slightly higher, implying rough parity in compensation between the public and private sectors. However, properly accounting for retiree health benefits and defined-benefit pension plans generates a public compensation premium of around 15 percent. The additional job security granted to public-sector employees is equivalent to an approximately 15 percent increase in public compensation, meaning that the total public-sector pay premium in California may be as high as 30 percent.
- To put a finer point on the job security issue, as I blogged previously, if it were so bad being a state worker then the turnover rate would be very high . . . but the evidence suggests that’s not the case with private sector workers three times more likely to leave their job.
- Finally, the Crescendo study is all about differences in compensation. However, it says nothing about employment levels. My research shows that over-employment in the state government workforce is just as big of a problem as over-compensation.
These are some of the technical issues with the study, but there is a bigger picture problem yet to be discussed and that is the fact that Maine’s private sector has been continuously shrinking as a percent of personal income and now ranks as one of the smallest in the country. Additionally, over the last decade the private sector has lost 15,400 jobs while state and local governments have added 400 jobs. In the face of these devastating losses, the claim that state government workers are making less than the private sector just doesn’t pass the smell test–especially when it’s private sector workers that disproportionately represent those in the unemployment line.