Report counters narrative that Ohio public employees make more than private-sector workers

Posted on: October 12th, 2011 by The American Independent 1 Comment

In the battle over Senate Bill 5, proponents have pointed to various studies that claim to show a large disparity in pay between public sector workers and their private sector counterparts. One such study — a report (PDF) released in September by the Ohio Business Roundtable claiming that public sector employees in the state receive 43 percent more in compensation than their private sector counterparts — is riddled with errors, according to the Economic Policy Institute.

The Ohio Business Roundtable study, conducted by Andrew G. Biggs of the American Enterprise Institute and Jason Richwine of the Heritage Foundation, reached its conclusion by relying on numerous faulty assumptions, says the Economic Policy Institute.

According to EPI’s brief:

Biggs and Richwine double count retiree health benefits and inflate the costs of employee pensions, among other errors. They also create a “job security premium” for public sector workers even though more than 40,000 Ohio public employee jobs have been lost in the last five years. In addition, Biggs and Richwine use calculations in their study that cannot be replicated.

EPI’s Jeffery Keefe found that, when looking at total compensation, which includes both wage and non-wage benefits, public employees tend to make a little less than their private sector counterparts:

Looking at total compensation (wages and nonwage benefits), Ohio public employees annually earn 6.0 percent less on average than comparable private-sector employees and 3.5 percent lesson on an hourly basis. The analyses were adjusted for the increases in employer contributions to pension and retiree health insurance from 12 percent to 15 percent of total compensation, which reduced the hourly total compensation comparison to zero. In other words, public employees in Ohio earn no more and no less than similar private-sector employees in the state.

Despite earning less money on an hourly basis, those in the public sector tend to be more highly educated than their private sector counterparts. Nearly half — 49 percent — of all of Ohio’s public sector employees hold at least a bachelor’s degree, compared with just 26 percent of the state’s full time private sector workers.

Public sector employees do tend to receive better benefit packages than their private sector counterparts. However, they sacrifice wages in order to receive better health and retirement benefits. According to Keefe:

While some benefits are more generous in the public sector, it would be wrong to conclude that comparability of compensation between the public and private sectors requires that every element of compensation be the same. What is important is this: Considering both the cost of employer-provided benefits and direct wages, public-sector workers in Ohio receive compensation that is equal to what they would receive in the private sector.

SB5, signed into law by Ohio Gov. John Kasich (R) in February strips state public employees of bargaining rights. A referendum on SB5, known as Issue 2, heads to Ohio voters on the Nov. 8 ballot.

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