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Are Teachers Driving The Public/Private Sector Earnings Gap?

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<i>This illustrates the fact that more educated, highly-skilled workers – such as teachers and professors - suffer a more substantial earnings penalty for government work</i> Two significant flaws, though: 1) You're just looking at wages, right? This doesn't account for the very expensive benefits that some teachers get; as we've seen in Milwaukee, benefits are worth an additional 74% on top of wages. Not that all teachers get this level of benefits, but it's a potentially huge source of bias here. 2) This analysis seems to treat all educational levels as equivalent. But that's clearly wrong: a master's in education is not the same as a master's in computer science or engineering, and there's no reason to expect the economic reward to be equivalent.

Stuart, Regarding your first point, you’re correct that the analysis is of earnings (income from wages and salary) and not benefits, as I pointed out repeatedly throughout the post. I would have gladly included benefits, but detailed data are not collected by most major surveys, including the Census. But we can get a rough idea from the BLS (Q4 2010), even though I can only crudely adjust these figures for differences in education, etc. (by comparing teachers with other professionals). The average ratio of *total* benefits to salary costs for U.S. public sector teachers is 0.415, and 0.469 for all public sector (state/local) professionals. For private sector professionals, the ratio is 0.417. If you want to include only health and retirement benefits (as Robert Costrell did in the WSJ article you are referencing), the BLS does not permit one to separate out teachers for these more detailed estimates of benefits, but the average ratio (September 2010) for all public sector professionals is 0.339, compared with 0.225 among private sector professionals (and 0.241 for all private sector workers). So, if the 74 cents figure for Milwaukee is accurate, it would appear to be a giant anomaly. (Source: http://bls.gov/ncs/ect/) I would also add that benefits-to-salary ratios present a rather incomplete picture when it comes to assessing whether a group of workers is “overcompensated” (which is the focus of this post). For example, low-wage workers who also get health insurance would have very high ratios, even though their total compensation is modest (just as high-earners would have lower ratios, even though they might be well-compensated). As you know, higher (health/retirement) benefits-to-salary ratios among public employees probably indicate that they trade salary for these benefits. This "tendency" has other potential implications (e.g., budgeting uncertainty for state/local governments), but total compensation among public employees is competitive with or lower than that among comparable private sector workers. As for your second point, although you’re probably correct that the returns to an education master’s are a bit less than those to an engineering degree, the entire purpose of the analysis in this post is to look at the public/private gaps when teachers are *excluded* from the sample. Thanks for the comment, MD

<i>although you’re probably correct that the returns to an education master’s are a bit less than those to an engineering degree</i> The returns ought to be only a small fraction, given the relative difficulty and meaningfulness of each respective master's degree. Which is why I think this conclusion is massively unproven: <i>more educated, highly-skilled workers – such as teachers and professors - suffer a more substantial earnings penalty for government work.</i> How so? To conclude this, you'd need (at a bare minimum) to compare public school teachers with master's degrees in education to non-public school teachers with master's degrees in education. A comparison of teachers with master's degrees in education to private sector workers with master's degrees in other fields doesn't tell us anything.

"How so? To conclude this, you’d need (at a bare minimum) to compare public school teachers with master’s degrees in education to non-public school teachers with master’s degrees in education. A comparison of teachers with master’s degrees in education to private sector workers with master’s degrees in other fields doesn’t tell us anything." How does it tell us nothing? It shows that teachers, with their attained level of education, could earn more if they chose to enter the workforce, and therefore there isn't that monetary incentive to go into teaching for many people-- many people recognize that even if they like the idea of teaching, their wages will be higher in another job in the private sector. See this article, for example, (I don't know if it's any good) which looks at teacher wages over time and compared to the private sector. http://www.nea.org/home/14052.htm

"It shows that teachers, with their attained level of education, could earn more if they chose to enter the workforce" No, it doesn't. To put it bluntly, the market wages earned in the private sector by people with masters' degrees in business or computer science or engineering tell us absolutely nothing about what public school teachers with masters' in education would supposedly earn if they left public schools and tried to find work elsewhere. Outside of private schools, a masters' in education isn't going to be worth much to any private sector employer, is it? But private school wages are much lower on average than public school wages: NCES reports that "In 2007–08, the average annual base salary of regular full-time public school teachers ($49,600) was higher than the average annual base salary of regular full-time private school teachers ($36,300).” Where in the private sector would masters' degrees in education be worth anything at all, let alone more than in public schools?

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