How about that timing of worker pay report?

The same day public workers were rescuing hurricane victims out East, and Iowa police officers were being shot in a bank robbery, the Branstad administration chose to release a study on state workers’ pay.

Mike Owen
Mike Owen

Timing is everything.

Consider the announcement Tuesday by the Branstad administration of a new report produced by an outside company to examine whether Iowa state workers are paid too much.

Paid too much?

As the Department of Administrative Services was releasing the report, emergency rescue workers across the Eastern seaboard were putting themselves in harm’s way to help their neighbors in the path of the deadly Hurricane Sandy. And right here in Iowa, within a couple hours of the DAS news conference, bank robbers shot two law enforcement officers — critically wounding the Sumner police chief and injuring a state trooper.

We count on public servants every day, sometimes when lives are at stake, sometimes in enriching life with education, sometimes in just keeping life orderly enough that we can enjoy it without worrying whether the water or food will poison us, or that our job will not put us in danger we did not sign up for.

Oh, and the report? It found that pay scales for Iowa state workers are generally competitive. Where the report cited potential problems, the information provided was too sketchy to delve in and really go through it. And, being produced by a private company that copyrighted the report, we might just never know what our tax dollars produced. This is what happens with privatization, folks. But if you want a quick look at the holes in the report, see the review Tuesday by IPP’s Peter Fisher.

So, for those less inclined toward knee-jerk appeals against public workers, the timing of this report, you might say, wasn’t too bad.

Posted by Mike Owen, Assistant Director


Who would take Governor’s deal?

Why are state employees the Governor’s target? Revenues are up, and the Governor is happily giving away millions to companies that don’t pay income tax. Why should state workers take a $1,000 pay cut?

Mike Owen
Mike Owen

There’s a little gamesmanship about public-worker benefits this week that is avoiding a critical question: How will the state compensate workers for giving up negotiated health benefits?

Governor Branstad on Monday repeated his plans to push for a 20 percent premium contribution by state employees in the next contract, putting out a pledge to pay that amount himself right now. For the Governor it’s $224 per month.

IPP’s Andrew Cannon has done a good job of exposing the fact that public worker health benefits in Iowa, while more generous than those offered in the private sector, don’t make up for lower pay in comparable positions or positions requiring comparable qualifications/education. On balance, there is a penalty for working in the public sector.

Governor Branstad doesn’t talk about the wages/salary side. He is ignoring the fact that, unlike his pay and that of state legislators, state employees’ benefits in place are a result of bargaining — a point acknowledged far too little, but thankfully was cited this week by the Muscatine Journal’s Steve Jameson. State employees agreed on the pay levels they receive in the context of other benefitsthey al so receive.

Oddly, when the Governor says state workers should pay $1,000 toward their health insurance, he is peddling it all as savings to the state. Actually, we should expect salaries to go up to compensate for lost benefits.

Also, why are state employees the Governor’s target? Revenues are up, and the Governor is happily giving away millions to companies that don’t pay income tax, and leaving corporate tax loopholes open as well. So explain again, please: Why should state workers take a $1,000 pay cut?

Who would take that deal?

By Mike Owen, Assistant Director

Look at more than public employees’ health benefits

A comprehensive and holistic look at public employee compensation reveals that the political talk driving some public policy proposals is mere myth.

Andrew Cannon

It will not be surprising, in the post-Wisconsin-recall world, if policymakers feel emboldened to challenge public employee compensation. Governor Branstad has already signaled that some of his policy initiatives in the coming years will bear the stamp of Wisconsin. In a June 12, 2012, meeting with Des Moines Register reporters and editors, the Governor said he intends to require public employees to contribute 20 percent of the cost of their health insurance.

If that sounds reasonable — considering that private-sector workers contribute, on average, more than 20 percent of their health insurance premiums — it misses the realities of overall public employee compensation.

While it is true that public employees contribute less on average to their health insurance plans than private-sector workers, they have negotiated the benefit as part of overall compensation packages that, all political hyperbole and “conventional wisdom” aside, typically leave public employees behind their private-sector counterparts. As IPP research has demonstrated, public workers tend to be paid considerably less than similarly educated workers in the private sector. Generally better health insurance benefits do not compensate for the deficiency, so a gap remains.

After controlling for experience, education, and other demographic factors, public-sector employees still receive 6 percent to 8 percent lower overall compensation — that is, pay, health, dental, life and disability insurance, and retirement benefits — than private workers.

A comprehensive and holistic look at public employee compensation reveals that the political talk driving some public policy proposals is mere myth.

Requiring an employee contribution of 20 percent of health insurance premiums is a disguised cut in compensation and amounts to a repudiation of contracts that have been negotiated in good faith between public employees and the state. Furthermore, it would widen the gap between public and private sector pay.

Posted by Andrew Cannon, Research Associate

New York Times study confirms IPP report

Despite the different methodologies and the different datasets, the numbers tell the same story: State government workers with a college degree or more — over two-thirds of Iowa’s public sector workforce — are paid less than college-educated private sector workers.

Andrew Cannon photo
Andrew Cannon

The New York Times story comparing the earnings of private-sector employees with state government employees confirms what the Iowa Policy Project found in a new report the same week: When you control for education, most state government employees are paid less than their private-sector peers.

Despite the similar findings, our study and the Times study used different approaches.

First, the Times study was more limited in scope, looking only at state government workers, while our study looked at state and local government employees. This matters because local government workers, as our analysis showed, are compensated even more poorly than state government workers.

Our study also accounted for factors that are known to affect compensation beyond education, such as work experience, firm size, sex, race, and annual hours worked. In addition, our study attempted to account for the effect of the public sector’s more generous benefits packages. The Times story looked only at wages.

Second, the Times used slightly different methodology and a different data source than we used. The difference in categorizing education was the most important difference in methodology between our report and the Times’ story. Workers with associate’s, bachelor’s, master’s, professional and doctoral degrees were all lumped together in the Times report as one group, and workers with some college but no degree, a high school diploma, or workers with less than a high school education as the second category.

Categorizing workers that way distorts the picture. It inflates wages in the public sector, as a much larger proportion of state government workers have master’s, professional and doctoral degrees, and a smaller proportion of state workers have an associate’s degree, than in the private sector. Figure 1 in our analysis demonstrates the key differences in educational distribution among the sectors.

Our study also looked into each educational category, comparing, for instance, public-sector workers with a bachelor’s degree with private-sector workers with a bachelor’s degree. Thus the table that accompanied the Times story is not comparable to the results in Table 1 of our study.

Using the data set with which I conducted our study — the Census Bureau’s Current Population Survey — I compared median pay between the two sectors across the broad educational categories used in the Times story.

Despite the different methodologies and the different datasets, the numbers tell the same story: State government workers with a college degree or more — over two-thirds of Iowa’s public sector workforce — are paid less than college-educated private sector workers.

The Times study found that college-educated state employees earn 6.9 percent less than college-educated private-sector workers in Iowa. The analysis I conducted with our dataset was virtually indistinguishable, finding a 6.1 percent differential.

Among less-educated workers, our findings confirmed the Times, though the 19 percent state-government advantage reported by the Times outstripped the advantage in our data set by 8 percentage points.

The Times has made a valuable contribution to the discussion on public-sector and private-sector compensation. In addition to broadening the discussion by virtue of its vast readership, the Times also independently confirmed the analysis by IPP and the several different statelevel analyses conducted by the Economic Policy Institute. When the educational differences between the private- and public-sectors are accounted for, it is clear that most public employees could be making more money in the private sector.

Posted by Andrew Cannon, Research Associate

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