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Myth Buster: Public Workers Make Less Than Private Sector

A new report out today by the Iowa Policy Project shows public sector employees make less than private sector employees for comparable work.  Click here for the full report.

Here’s the story from the Des Moines Register:

Study: Public workers in Iowa are paid less than private-sector workers

10:30 AM, Feb 22, 2011 | by Jennifer Jacobs

Public employees in Iowa in general are paid less than their private-sector peers in comparable jobs, according to a new study by the liberal-leaning Iowa Policy Project.

Even if benefit packages are accounted for, Iowa’s public workers still are compensated less than those who work for private businesses, said Andrew Cannon, author of the new report.

The study contradicts recent statements by Gov. Terry Branstad’s staff that state employees make 47 percent more than their private-sector counterparts. That figure was based on a study that lumped together employees with and without college degrees who work full- and part-time.

Cannon said it’s misleading to compare earnings of, say, teens in minimum-wage fast food jobs with university professors. Retail sales jobs make up 20 percent of private-sector jobs, he said.

For state government workers as a whole, male employees earned wages or salaries that were 9 percent less than comparable workers in private industry when taking into account education, experience and hours worked.

Women in state government earned 13 percent less, the study found. It looked only at full-time workers.

For local government workers, which includes teachers, men earned 14 percent less and women about 19 percent less than private counterparts, it says.

A battle in Wisconsin over collective bargaining rights there has put the spotlight on labor costs and worker rights in Iowa.

The study was timed for release today to coincide with a rally at the Iowa Capitol on workers’ rights and the first public meeting on a Republican bill in the Iowa House that would make significant changes to the state’s collective bargaining law.

Gov. Terry Branstad, a Republican, thinks unions should no longer have any say over their health insurance. Instead, government managers should exclusively decide how much employees contribute.

“It makes no sense for us to have health insurance as a mandatory bargaining item,” Branstad said in a telephone interview last week. “The result of it is we have an absolutely dinosaur system which is extremely expensive. That has got to change.”

Branstad has also called for changes to the state pension system. State and local government should no longer be entirely responsible for promised benefits in the future. Instead, benefits would depend more on how much workers contributed to their plans over time, he has said.

It’s true that such benefits comprise a larger share of public employees’ overall compensation than for most private-sector workers, Cannon found.

But even after adding in benefits such as health insurance and pension contributions, total compensation for Iowa’s male and female public employees was lower than for their private-sector counterparts, he said.

Public employees received 11.6 percent of their compensation in the form of health and other insurance benefits while workers at small, medium and large private firms received 7.2 percent, 8.4 percent and 10 percent.

Similarly, they receive a larger share of their compensation in the form of retirement benefits (6.4 percent) than private-sector workers (3.3 percent for small firms, 3.6 for medium firms and 5 percent at large private firms).

When examining all benefits (wages/salaries plus benefits), women in state government were compensated 8 percent less than private counterparts. Men were compensated 6 less.

For local government, men earned 9 percent less and women 13 percent less than private counterparts, it says.

Almost one-sixth of all Iowa jobs — 234,400 of Iowa’s 1.47 million total non-farm jobs — are in either state or local governments, the study says.

Cannon explained that an apples-to-apples comparison has to take into account education and hours worked. For example, over half of public workers have a four-year college degree or higher, compared to only a quarter of private-sector workers. Two-thirds of public jobs are considered professional or administrative, compared to half of private jobs.

David Osterberg, a former Democratic legislator and executive director of the Iowa Policy Project, said: “We need to be focusing on how to make jobs in Iowa better, and keep Iowa out of a race to the bottom with states that don’t treat workers well in either the public or private sector.”

The study used data from the U.S. Census Bureau’s Current Population Survey, from 2000 to 2010. Money was adjusted to 2010 dollars using the Consumer Price Index. It also used unpublished 2010 U.S. Bureau of Labor Statistics data.

MEETING TODAY:

Several Republican proposals for reforming Iowa’s collective bargaining system were rolled into one bill – and House Study Bill 117 is the one the Iowa House will work from, state Rep. Lance Horbach, R-Tama.

Here are key provisions of the bill:

VETO POWER: An arbitrator’s decision on state employees’ wages would no longer be final – either chamber of the Iowa Legislature or the governor could choose to reject it. (This applies to state workers only.)

HEALTH INSURANCE: Unions could no longer negotiate for changes to their health insurance plans. Government managers would solely decide contributions.

LAYOFFS: Unions would no longer have any say regarding layoffs. Currently, they can discuss preventing layoffs with alternatives such as unpaid furlough days, or, if layoffs are unavoidable, a union seniority system is used.

ABILITY TO PAY: Arbitrators would have to look at how a contract agreement would affect the budget, including whether taxes would need to be raised in order to pay for it.

NO PAST CONTRACTS: Arbitrators would no longer have to consider past contracts between a public employer and its employee unions. That means past wage freezes or benefit concessions would not be taken into consideration.

COMPARE MORE WAGES: Instead of considering only public-sector wages and benefits, arbitrators would look at comparable private-sector jobs before deciding what to award workers.

OUTSOURCING: Restrictions or limitations on outsourcing would be lifted.

MIDDLE GROUND: Arbitrators could set a compromise be- tween management’s offer and the union’s offer. For example, if a school district offers a zero percent pay raise and the union 5 percent, the arbitrator could choose 2.5 percent. Right now, arbitrators can pick only one or the other.

“FREE AGENTS”: An employee could become a “free agent” and opt out of representation by the union. The union would go to the bargaining table for one group of workers, then individual free agents would each go to their bosses on their own. No state has such an arrangement.

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