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News from EPI Public-sector workers in Connecticut are not overpaid compared to their private-sector counterparts

In Unequal public-sector pay in Connecticut? Yes—taxpayers are getting a bargain!, EPI economist Monique Morrissey shows that, despite claims to the contrary, public-sector workers in Connecticut are not overcompensated compared to their private-sector counterparts. Morrissey’s analysis shows that wages and salaries are 14–16 percent lower on average for Connecticut public-sector workers, compared with similar workers employed by large private-sector firms in the state. Public-sector workers receive benefits worth approximately 16 percentage points more as a share of salary. Thus, compensation costs are roughly equal in the two sectors.

Consistent with national patterns, while Connecticut workers without college degrees are compensated somewhat more in the public sector than in the private sector, those with college and graduate degrees are compensated somewhat less. This is true even when factoring in the more generous benefits in the public sector. Because public-sector workers are more likely to have college degrees, public employers—and taxpayers—are getting a bargain while ensuring a decent standard of living for less educated workers. Moreover, many low-wage employers in the private sector shift costs onto taxpayer funded programs. By paying their workers a livable wage with good benefits, public sector employers avoid these extra costs.

“Public-sector workers are a punching bag for activists who want to shrink the size of government and weaken unions,” said Morrissey. “Connecticut lawmakers should ignore false claims that their public employees are overpaid. In fact, as is the case nationwide, Connecticut taxpayers are getting a bargain, because teachers, social workers, firefighters, and other skilled government workers view public service as a calling, not as a way to get rich.”

The paper is a critique of an analysis conducted by Andrew Biggs of the American Enterprise Institute and published by the Yankee Institute for Public Policy. Biggs argues that Connecticut’s public-sector workers are compensated 25–46 percent more than comparable private-sector workers.

Morrissey concludes that Biggs’ unexpected finding is the result of his flawed methodology. First, he chooses an unrepresentative sample of public-sector workers, excluding teachers, public safety officers, and all local government employees. He includes the higher benefits of these workers in some calculations while excluding their lower salaries from others. Biggs also uses nonstandard controls in his regression analysis, among other things  implicitly attributing pay differences to “human capital” that are just as likely to be due to discrimination, altruism, and other factors unrelated to potential productivity. Finally, Biggs adds inflated estimates of the cost of public-sector pensions and retiree health benefits.