March 29, 2010

Balancing Public Sector Pay From the Town to the Nation

Justin Katz

I've already been arguing, at the town level on up, that the economic downturn needn't tax the future, through debt, nor decrease programs that local folks want. Glenn Reynolds offers a bit of evidence that I'm right:

What if government workers earned the average of what private workers earn? States and localities would save $339 billion a year from their more than $2.1 trillion budgets. These savings are larger than the combined estimated deficits for 2010 and 2011 of every state in America. In a separate survey, the federal Bureau of Economic Analysis compares the compensation of public versus private workers in each of the 50 states. Perhaps not coincidentally, the pay gap is widest in states that have the biggest budget deficits, such as New Jersey, Nevada and Hawaii. Of the 40 states that have a budget deficit so far this year, 28 would have a balanced budget were it not for the windfall to government workers.

Rhode Island has been giving away the store, on this count, and many of the paying customers have been leaving, making matters worse. It's well past time to turn that all around. Perhaps folks who've just gone along to get along are starting to understand what's been happening as the decades have rolled on by.

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I saw this, too. It's fascinating and a little revolting.

Posted by: Monique at March 29, 2010 6:31 PM

What Glenn Reynolds doesn't take into account in Hawaii is that tourism is the #1 economy for the islands. You have a recession people don't spend money or go on vacation. Lumping Hawaii into one group with the mainland without explanation and blaming government wages creates a falsehood of information.

Two airlines that serviced Hawaii went bankrupt eliminating over 600,000 flight seats to the islands. If you wanted to vacation in Hawaii and spend your money you can't get here because of less flight seats. That is loss 4.5% sales tax.

State of Hawaii employees, Executive, General Assembly, Judicial, teachers and City and County employees with union approval took layoffs, a 5% pay cut plus unpaid furlough Fridays making total cuts in salary about 10% of pay for 2010 and 2011 to help balance the budget (Hawaii state budget is calculated for 2 fiscal years).

Unemployment in Hawaii peaked at 7.2% and is now down to 6.9%. It was averaging 2.7% to 3.2% normally.

Other airlines have added combined 500,000 flight seats to Hawaii in 2010 also the cruise lines have increased number of cruises to Hawaii to help pick up the tourist slack (Hawaii still needs to get back to the extra 100,000 flight seats). Hotels are discounting and creating deals that rival 1970 prices.

Tourist numbers are up and room occupancy is rising each month so the loss sales tax income is rising helping to stabilize the budget deficit along with the State and City workers giving back wages.

Hawaii has the most expensive housing market in the nation. Single family house average $575,000 and condominium average $350,000. The average family of four (husband, wife and 2 children) living in Hawaii needs an income after taxes of $60,000 to meet basic needs. Honolulu apartment rents average $1,700 a month.

It would be nice if Glenn Reynolds told the whole story instead of trying to blame the government workers salaries for the budget deficit.

Posted by: Ken at March 29, 2010 7:57 PM

The question could easily be reversed - what if pay and employment for folks in regular jobs was higher.

The answer to that is easy. There would be more tax revenue, more business for ALL merchants and less deficit and debt.

Can't you see that? Or are you just blind on one side?

Posted by: Stuart at March 29, 2010 8:03 PM

Somebody explain to Stuart what Pareto efficiency means.

Posted by: Dan at March 29, 2010 8:58 PM

If government workers earned the average of what private workers earned we would have a lot of underpaid public workers. There simply are not as many low skilled jobs in the public sector. Using averages is misleading.

Posted by: michael at March 30, 2010 8:44 AM

There are also not as many high-skilled jobs in the public sector, Michael, and it doesn't explain the disparity in pay for nearly identical positions. It also doesn't explain the difference in benefits on top of salary. I don't believe your statement for a minute.

Posted by: Dan at March 30, 2010 9:55 AM

Well then, Dan, average everything and we'll have equity for all, ala Karl Marx.

Posted by: michael at March 30, 2010 11:40 AM
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