Government Workers Cost 45% More Than Private Sector Workers
The United States Bureau of Labor Statistics (BLS) announced on March 12th that the total cost of employing a state or local government worker is 45% more than an equivalent worker in the private sector.
For the month of December 2013, employers in private industry spent an average of $29.63 per employee hour worked, but the equivalent cost for a government worker averaged $42.89 per hour. Not only do government employees average 33% higher pay than those in the private sector, their pension and retirement benefit costs are now an incredible 254% higher also. Given that compensation formulas for federal, state, and local government are comparable, it should come as no surprise that this year spending by the U.S. government will exceed revenue by an all-time high of $744.2 billion, and our gross national debt is a stunning $18.5 trillion.
The BLS reported
that private employers spent $20.76 on average for wages and salaries, plus $8.87
for benefits per hour worked. State and
local government paid $27.66 for wages and salaries, plus $15.23 for benefits
per hour worked. Government employees cost
33% more in wages and 71% more in benefits. The biggest difference is that government pension costs are 254% higher
than the private sector.
differentials explain why, despite supposed efforts to rein in public spending,
net federal, state, and local government spending rose from $6.1 trillion in 2013 to $6.3 trillion in 2014 and will reach $6.6
trillion in 2015. The spending rate is actually
$600 billion higher, but the federal government gets “inter-governmental
transfers” of $600 billion. The
transfers come from U.S. government revenues, such as the $89.9 billion dividend the U.S. government received from the
Federal Reserve, as shown below:
Government Spending Fiscal Year 2014:
Gross Spending $3.7 trillion
Direct Spending $1.5 trillion
Local Direct Spending $1.7
Net Spending $6.3 trillion
The BLS Employer Costs for Employee Compensation (ECEC) report also broke down the “legally required benefit costs” in
private industry for December 2013, which averaged $2.43 per hour
worked, or 8.2% of total compensation. Social
Security comprises the largest legally required benefit cost component at $1.39
per hour, or 4.7% of total compensation. Costs for other legally required benefits
include workers’ compensation of $.43 or 1.4% percent of total compensation;
state unemployment insurance, which averaged $.23 cents per hour worked or 0.8%;
and federal unemployment insurance, which averaged just $.04 per hour worked. Discretionary benefits for life, health, and
disability insurance for private industry employers averaged $2.45 per hour
worked or 8.3% of total compensation. Overtime
and premium, shift differentials, and nonproduction bonuses averaged another $.85
per hour worked or 2.9%, while retirement and savings averaged $1.10 per hour or 3.7%.
The “legally required benefit costs” for federal,
state, and local are only about $1.78 or 6% of wages. Government employees usually do not have to
pay into Social Security, but on every other category of benefit, their
employers pay much higher costs to cover much richer benefits.
of all Americans are employed by the federal, state, and local government. But since only 56% of working-age Americans have
a job, this works out to about one government worker out of eight people who
are actually working. This percentage
has remained about the same for the last 35 years.
Back in 1979, higher public sector pensions were
considered fair compensation since the private sector paid higher wages. At the time, federal government debt was only
about a third
of America’s GDP. But every year since
then, public sector wages and benefits have grown at about 1% faster than the
private sector. As the Bureau of Labor
Statistics report demonstrates, the faster compounding of total compensation for
the government workers has now reached a record 45% higher than the private
sector. This generous treatment of
public employees at least partially explains why America’s federal debt has
more than tripled
to 110% of GDP.