Think Federal Workers Are Overpaid? Look Closer to Home

Rich Smith
Updated
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Want a good salary and benefits? Get a job with the federal government -- or so the prevailing wisdom goes.

But if you really want to take home more than the average Joe, get a job working for the state.

In a report released earlier this year, the Congressional Budget Office confirmed America's long-standing hunch that federal employees are making out like bandits compared to their private sector counterparts. Judging strictly by pay stubs, the majority of public employees with education levels ranging anywhere from no high school diploma, all the way up to a college degree, out-earn their private sector peers.

The advantage only swings toward the private sector when workers possess a master's degree or better. What's more, when you factor in the value of generous government perks, even private sector master's degree-holders lose out.

Overall, the CBO found that federal government employees of similar backgrounds, levels of experience, and education earn about 2% more in base salary than comparable private sector employees. Add in health insurance, pensions, and paid vacations (which average 48% higher for federal government workers), and the net result is 16% greater total compensation for federal government workers.

Nice Work If You Can Get It

Numbers like these are bound to raise some ire among the taxpaying public. So why do so many government workers still lament their "low" wages? They may be neglecting to factor in the value of their benefits (for college graduates and higher). Or it may be that the folks doing the most complaining belong to the upper class of "professional degree or doctorate" holders, who do in fact earn a bit less (barely $90,000), and receive fewer benefits (worth about $50,000), than their private sector counterparts. After all, this category includes lawyers -- and the federal government hires a lot of lawyers.

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But even for the unlucky few government employees who are getting the short end of the paycheck, there's a solution: Don't work for the federal government. Work for one of the states.

Think Globally, Work Locally

According to a new report out of the Bureau of Labor Statistics, the wages being earned by government employees at the state and local levels would make a federal government lawyer blush.

Here are the headline numbers -- again, focusing on total compensation that includes both base salary and benefits:

  • On average and across the country, the total employee compensation for employees both public and private "averaged $30.69 per hour" in June 2012. (That covers wages, plus all benefits and costs.)

  • Within private industry, however, "total employer compensation costs ... averaged $28.78 per hour," according to the BLS report. (Of this, wages and salaries constituted 70%, with perks making up the balance).

  • Meanwhile, "total employer compensation costs for State and local government workers averaged $41.16 per hour" (of which wages and salaries made up 65% of the total. So again, whether at the state, local, or federal level, government still provides the best benefits).

As you might guess, the biggest factor in state and local government compensation is benefits. Result, as a percentage of total compensation, government workers make out on such benefits as:

  • Paid leave (7.3% of total compensation).

  • Insurance (12%) (Health insurance in particular -- 11.6%).

  • Retirement and savings plans (8.5%) (Defined benefit pensions in particular -- 7.7%).

  • In contrast, workers in the private sector have the edge on performance bonuses and defined contribution plans -- i.e., 401(k) plans. Despite these small victories, though, when you get down to the bottom line, public state and local employees still out-earn their private sector counterparts by a whopping 43%.

That's more than twice the difference between compensation rates at the federal government level.

Taxpayers constantly complain that federal government workers are overpaid, underworked, and "feeding at the public trough." The clear implication of this recent study: The better meal is to be had from state and local governments.

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