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Executive Summary

Are public sector workers overpaid relative to the private sector? Reports by groups such as the American Legislative Exchange Council (ALEC), an arm of the Heritage Foundation, would have the public believe so. Yet many other studies and recent data from the Bureau of Labor Statistics lead to a different conclusion. In careful "apples to apples" comparisons, the following report finds that the playing field for compensation is essentially level.

The problem with the ALEC reports is that they try to lump apples and oranges together and end up skewing wage comparisons against public workers. Specifically, the ALEC reports do not account for the greater share of professional and technical occupations in the state and local government workforce, which tend to be higher paid. Also, when actual job titles are matched up, rather than making overly broad comparisons or averages, public sector jobs are often paid less than their private sector counterparts. Geographical differences also matter, with there being greater variations in compensation between public and private sector wages in different cities around the country, for example, than there is between public and private sector wages within a city.

In addition, this study finds that public sector workers do not necessarily enjoy better benefits than those in comparable private sector positions. Only a slightly greater percentage of state and local government workers are covered by health insurance than workers in comparably sized private sector establishments. And state and local government workers actually lag behind private workers when it comes to other benefits, like life insurance, disability, sick and accidental insurance coverage. While a greater share of state and local government workers enjoy defined benefit pension coverage when compared to private sector employees, nearly one-third of all public employees are not eligible for Social Security and must rely solely on their pensions for retirement benefits. Also, many state and local government workers' pensions are not protected to the same degree as private sector pensions are.

Upon closer scrutiny, then, it is clear that compensation packages between the private sector and the public sector at the state and local level is highly competitive and do not favor of public sector employees.

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