Work and Occupations

Are Teachers Driving The Public/Private Sector Earnings Gap?

A great deal of the debate surrounding public sector unions focus on how much public employees earn versus private workers. Every credible analysis – those that account for huge differences between public and private workers in terms of characteristics like profession, education, and experience – find that public compensation is competitive or lower than that of private-sector workers (for recent examples, see here, here, and here, or a review here).

I have, however, heard a few thoughtful observers make the point that virtually all these analyses include education workers, and that this might be a little misleading. It’s a fair point. Roughly one in five state/local government employees are in fact K-12 teachers, while another five percent are professors at public colleges and universities. This is important because analyses of public/private sector compensation essentially compare public employees with workers with similar characteristics (education being the most important one) in the private sector. The research above indicates that workers with more education pay a larger “price” for working in the public sector, whereas many lesser credentialed, lower-skilled government jobs actually pay more. Since many teachers have master’s degrees (and professors Ph.D.’s), and they are such a huge group, it’s reasonable to wonder if they might be skewing the overall estimates.

So, I decided to see if a comparison of public/private compensation that does not include teachers and professors would yield very different results. Let’s take a look.

How To Make A Misleading Public/Private Earnings Gap Disappear

USA Today last week published yet another story claiming that public sector workers make more that their private sector counterparts - this one saying that Wisconsin is one of many states where this is the case. Their “analysis” used data from the Bureau of Economic Analysis, and compared total compensation (salary+benefits) between workers in the private sector and state/local government.

No matter how many times they are told that you can’t just make a straight comparison of dissimilar groups of workers, apparently they still don’t get it. Incredibly, this particular article admits as much, and even quotes economist Jeffrey Keefe, who tells them that the gross comparisons don’t account for important sectoral differences in education and other factors. In other words, their numbers don’t tell us much of anything about public versus private sector compensation. Still, there is the headline: "Wisconsin one of 41 states where public workers earn more." How many people saw that headline, and now believe that public workers are “overpaid?"

USA Today, of course, is not alone. These assertions have lately become insidious, coming from governors, commentators, and others. But when a major national newspaper decides to run this story at this politically-charged time, based on their very own “analysis," a separate response seems in order.

I’ve discussed this issue before, but maybe it would be more helpful to show how the data are more properly analyzed in a step-by-step fashion, using 2009 U.S. Census microdata (the American Community Survey, available from the wonderful organization IPUMS.org). Here’s how you make a false earnings gap disappear in five minutes.

Ready, Disclaim, Fire

Earlier today, newly-elected Michigan Governor Rick Snyder released his "Citizens’ Guide to Michigan’s Economic Health." The general purpose was to provide an easy-to-understand presentation of the state’s finances, and to encourage local governments to do the same. These are of course laudable goals, but one of the report’s major findings, also mentioned in the governor’s press release, was a familiar one:

Average annual compensation of state employees (including salary, wages, and benefits) was over twice the average annual compensation of private sector workers in 2009.

As might be expected, many reporters and editors dutifully ran this outrage-inspiring finding as a headline (also here and here), even before the report was officially released: State workers make twice as much as private sector workers. Governor Snyder rolled out the report as part of his presentation to the Business Leaders for Michigan Summit, in which he spoke about the state’s fiscal situation.

I’ve already discussed how these gross comparisons of public and private sector workers – whether nationally or in a single state – are invalid. That is, they compare two completely different groups of workers: Public employees, who are mostly professionals, and private sector workers, many of whom work in lower-wage, lower-skill jobs. But this time, you don’t need to take my word for it. After featuring the “twice as much” finding in a header and pull-out quote, the governor’s report says it directly:

However, this analysis does not compare private and public sector employees with similar jobs, years of experience, or education.

Let me translate that for you. It means: This comparison is meaningless.

Meet The Bureaucrats

You needn’t look far to see that state public employees are under intense scrutiny. Politicians and other commentators are using rhetoric that is simplistic and often misleading. But, in the debate over their relative value, these state workers have an additional problem: I get the strong feeling that most Americans have little idea what they do.

If you ask the average person to describe what a public employee does, you might hear the word “bureaucrat." Those who wish to dismantle large chunks of the public sector have come to use the term as the pejorative for all public servants (most often in the federal government context) - probably in the hope that it will conjure up images of large government buildings filled with endless rows of faceless, overpaid desk workers collating papers.

So, who are these state public employees? What are they actually doing? These are very basic questions, yet they are rarely addressed in detail, at least not lately. And, let’s be honest – in one way or another, our tax dollars do pay for these workers’ services, and regardless of your views on state budget troubles, it’s always good to know what you’re paying for. Luckily, of course, the question is easily answered. In the simple table below, using 2009 data from the Occupational Employment Statistics program of the U.S. Bureau of Labor Statistics, I present the breakdown of state government workers by occupational category (note: these categories are comprised of varying numbers of similar detailed occupations, and while my examples in the table are the largest, they are not the only ones in each category).

In order to summarize this table, let’s suppose you’re invited to a party to meet ten people, who are a roughly representative sample of the 4.5 million state employees across the nation. Let’s meet the bureaucrats!

Treating Teachers Like Professionals

I was very interested to see, in a post by my colleague last month, that elementary school teachers were again voted among the top five most “honest and ethical” occupations in America, by respondents to a November 2010 Gallup Poll. 

According to Gallup, 67 percent of respondents rated the honesty/ethics of teachers as “high/very high," 24 percent rated it “average," and 6 percent rated it as “low/very low” (the error margin is +/- 4 percentage points). Only nurses, military officers, and pharmacists ranked higher (with doctors, who ranked 5th, in a statistical tie with teachers).

I found this interesting because it contradicts a key underlying feature of much of our public education debate. I’ve heard many thousands of teachers speaking out against the market-based reforms that are currently in vogue among opinion leaders, and seen them effectively ignored. I’ve heard everyone from Oprah to big-city superintendents to major television networks tout "Waiting for Superman" — a movie that supposedly focuses on teacher quality as the key to improving education, yet fails to interview even a single teacher. I’ve read hundreds of articles and posts that imply (and sometimes state directly) that teachers who oppose a favored policy do so because they "fear accountability," or that they are more interested in their compensation and job security than in the children they teach. 

Many teachers call this type of behavior "teacher hating" or a "war on teachers." In my view, however, the fundamental issue here is trust. And the public’s continued faith in teachers does not seem to be shared by many of today’s pundits and policymakers. These same people say frequently that they want to "treat teachers like professionals," but there's a lot more to that than personnel policies.

Whom Do Americans Trust? Nurses...And Teachers!

Just a couple months after the prestigious Institute of Medicine urged that nurses be seen as “full partners” in redesigning the American health care system, they have received another vote of confidence, this one from the American public. According to the most recent Gallup poll, for the 9th straight year (and the 11th year in all), the American people ranked nurses as the most honest and ethical workers in the country.

When asked to the rate the ethics and honesty of people in a variety of occupations, 81 percent of those surveyed gave a “very high/high” rating to nurses. Doctors received a very high/high rating from a still respectable of 66 percent of respondents.

Despite being regularly scapegoated by politicians and the media for the past several years, grade school teachers still edged out doctors by 1 percentage point (a statistical tie),  with 67 of those polled expressing high regard for the profession. Although this places teachers fairly high on the list of trusted professions—in fourth place, behind nurses (81 percent), military officers (73 percent), and pharmacists (71 percent)—the teacher bashing has apparently had an effect: Teachers have lost ground since the 2007 version of this survey, when they were rated "very high/high" by 74 percent of those surveyed.