The Public vs. Private Sector Compensation Conundrum

Salem Statesman Journal editor Dick Hughes just published a lengthy column asking whether public or private sector employees are better compensated. He cites studies that reach contradictory conclusions, depending on their assumptions, and then answers his question by stating, “Who knows?”

That answer must be challenged because he somewhat dismisses the apparent fact that “…public employees make a whopping 45 percent more” by saying, “One common finding…is that government has a larger proportion of higher-educated workers.”

While higher education may be a big determinant of government compensation, especially in unionized fields such as public school teaching, it means less in the private sector. In the private sector competence can trump credentials. For example, many tradespeople are compensated well above some of their college-educated counterparts because they can fix your plumbing when the pipes freeze, or correctly wire your house so it doesn’t burn down.

Finally, in your opinion, which highly degreed politicians and public employees are worth what we pay them? The list may change depending on whether you’re Democrat, Republican, or whatever, but you get my point.

When we freely purchase services from private sector employees, they earn roughly what they produce. When politics and union bargaining determine pay levels, public sector employees are often paid more than their private sector counterparts. Case closed.

Steve Buckstein is Founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

Learn more at cascadepolicy.org.