The great wage gap

Posted: Aug 20, 2006 12:00 AM

Let us now praise the underpaid, selfless civil servant.

Wait — does such a person exist in federal employ?

Excuse me while I chortle.

Oh sure, union officials, civics texts, and those blue-ribbon panels set up by defensive politicians often imply (and sometimes baldly assert) that government workers receive less pay than private employees. Sometimes they even bring up ideas like "selfless service."

Add a touch of cynicism to this, and you might say that government workers exchange higher pay for job security. (It can sure be hard to fire a bureaucrat.)

But it's high time to dismiss the myth. As the Bureau of Economic Analysis reported this month, federal civil servants receive far, far more in wages and benefits than workers in the private sector. Indeed, twice as much.

Average compensation for federal civilian workers last year came to $106,579 — which Chris Edwards of the Cato Institute notes is "exactly twice the average compensation paid in the U.S. private sector." Throw out the benefits and the difference is less, but still a whopping 62 percent more for the federal worker.

Of course, past figures used to bolster up the "underpaid civil servant" notion ignore benefits and consider just the nominal wage rate. But today's 62 percent difference is hard to ignore, isn't it?

But face it: nominal wages aren't real wages; for a true comparison we must add on all the benefits, as Edwards does: "Federal workers receive generous health benefits during work and retirement, a pension plan with inflation protection, a retirement savings plan with generous matching contributions, large disability benefits, and union protections." Let me put a stop to transcribing here. There's a lot more, and I don't get paid enough to risk carpal tunnel.

Figuring in all the benefits, Edwards suggests that government employees should be paid less than private sector employees, not more.

Nice idea, but to get that to happen, wouldn't we first have to fire the unions? Hmmm.

Now, the mere suggestion of lowering compensation — or even just curbing scheduled compensation increases — might be enough to incite incivility amongst our civil servants. But the point of bringing the matter up is not for the emotional reactions or to start a class war between net tax consumers and net taxpayers. It's not that federal employees are evil, deserving to be punished. They are simply overpaid.

So, why is federal employee compensation so high?

Well, here's one big reason: In bad times, when private sector wage increases grind to a halt, federal wages rise merrily upwards.

There are others, more basic in nature.

Think about it: Who decides the pay? Legislators.

A century ago and more, during the days of the "spoils system," one tried to get government jobs for people not because the jobs necessarily paid that well, but because they paid well for the amount of work done. Government work was a good place for artists or college grads from liberal schools. That is, for people who couldn't make it as artists and artisans and preachers and teachers, people for whom clerking in private practice was something worth shirking. Nathaniel Hawthorne famously wanted federal employ. In those days, government jobs were rather like short-term sinecures (often limited to the term of the party in office). A federal job was great haven for a novelist waiting to crank out a best seller.

Nowadays, of course, the spoils system is over. So to speak. Fewer people get jobs in government because they know someone who knows the new president or the newly elected Senator. We have a "more efficient" system now, the civil service. You have to take tests. And it certainly helps to sport a college degree. But once you get hired, it's hard to get fired, and your wages keep going up and up.

Looked at one way, it's an improvement over the old way of doing things.

Looked at another, it corrupts the whole economy. (Does it really help workers to idealize a system wherein productivity means almost nothing?)

But it doesn't corrupt legislators. Much. It gives legislators precious little to dole out to supporters. Unlike under the spoils system, it's harder for representatives to buy off constituents (other than by a general increase in government and catering to public employee unions, of course). What to do?

Pork to the rescue! Porkbarrel spending on constituent and private projects is an amazingly efficient way to dole out favors with other people's money. It's the spoils system reborn.

And as Mr. Edwards pointed out in another of his Cato reports, this sort of government favoring of private individuals is not limited to the federal government. Public debt for private projects amounts to 23 percent of today's total municipal debt. The old joke used to be "thank God we don't get all the government we pay for." Now taxpayers pay for so much that isn't government, we can repeat the old line only with an added bitterness.

There's something inherent in unlimited representative government, and that something is the spreading, thickly, of money to favored supporters. When the spoils system was replaced with a civil service, a new form of spoils grew to take its place.

Wouldn't it be nice if our representatives realized that it wasn't their job to spread money around without limit? If they could give up on the New Spoils System, on the one hand, and exercise some fiduciary responsibility regarding our paid employees, on the other, fiscal policy wouldn't be such a mess.

I won't be holding my breath.

And I won't be holding my breath for the people who complain about "overpaid corporate execs" to turn their ire against the thousands upon thousands of overpaid federal employees. The charge of "greed" will never affix to civil servants and their union representatives.

But greed is a cheap shot charge here as elsewhere. Everybody wants more money, and everybody has a right to ask for more. And employers have just as much right to offer only so much.

Perhaps it's just that, when negotiating with workers and unions, our representatives don't have much spine simply because the money "isn't theirs," and thus they have scant incentive to use it wisely.

The trouble with this explanation is not that it doesn't explain. It explains the situation too well: what room is left for reform? It suggests that politics and bureaucracies are themselves congenitally incapable of rational management.

Sure government workers are overpaid. But that only points to the bigger problem: the federal government has escaped popular control, and is increasingly run not for the benefit of the people, but for the benefit of the people in government.