Comparing Compensation: State-Local Versus Private Sector Workers

Publication Date: September 2011

Publisher: Center for Retirement Research at Boston College

Author(s): Alicia H. Munnell; Jean-Pierre Aubry; Joshua Hurwitz; Laura Quinby

Research Area: Economics; Government; Labor

Keywords: state-local; private sector; pensions; wages

Type: Report

Coverage: United States

Abstract:

The comparability of state-local versus private sector pay has become a major issue in the wake of the financial crisis. Funded levels of public pension plans declined sharply, and governments’ ability to make required contributions has been severely constrained by the collapse of state-local budgets. Politicians everywhere are looking for ways to reduce pension costs and increase revenues. Often such efforts are couched in terms of excessively generous existing compensation – especially, current pensions. Dueling studies have appeared arguing that state-local workers are paid less or more than their private sector counterparts. Virtually all agree that wages of state-local employees are lower than for private sector workers with similar education and experience, but researchers differ on the extent to which pensions and other benefits compensate for the shortfall. This brief builds on the recent wave of studies by refining the estimates of the value of benefits...