Public Employee Compensation and the Efficacy of Privatization Alternatives in US State and Local Governments

Authors


  • Jeffrey Keefe is at Rutgers University.

Abstract

This article investigates the evidence used in the debate over public-sector collective bargaining and privatization as US states attempted to resolve their budget problems. Specifically, the article evaluates the research on whether US state and local government workers are overpaid and whether privatization provides a cost-effective alternative to the provision of public services by public employees. All recent studies find that state and local public employees earn on average lower wages than comparable private-sector workers and on average receive better health benefits and pensions than private-sector employees. Most studies find that the better benefits offset lower wages on average, and there is no state and local public employee compensation premium. The research on privatization in the USA indicates that it has reached something of an equilibrium with approximately one-quarter of municipal public services being provided by private organizations. The major costs of privatization include overhead costs of competitive bidding, monitoring, oversight, and evaluation, which if done properly can often offset any privatization cost advantage, while if privatization is done without adequate controls, it can result in corruption, poor quality services, and then demands for reverse privatization.

1. Introduction

During 2011, public employee compensation became the focus of a highly charged political controversy as US states grappled with acute revenue shortfalls brought about by the most serious economic contraction and financial crisis since the Great Depression. Their dire fiscal circumstances unleashed a search for solutions and culprits. Forty-five states projected budget deficits for fiscal year 2012 totalling US$103 billion (McNichol et al. 2011). Several governors identified excessive public employee compensation as a major cause of their states’ fiscal duress. Some prominent newly elected Republican governors mobilized their Republican legislatures to cut public employee pay, reduce benefits, modify or eliminate collective bargaining rights, abolish civil service rules, increase managerial discretion in both pay and layoffs, and privatize public services. Many other governors both Democratic and Republican lead initiatives that successfully cut benefits and froze pay without altering collective bargaining rights. A total of 12 of the 34 states that provide rights for public employee collective bargaining weakened collective bargaining rights. Even Massachusetts with a completely Democratic state government, which was grappling with rising health insurance costs, provided local governments with more managerial discretion in implementing changes to health insurance plans and employee cost sharing.

Accompanying the charges of excess public employee pay were calls for privatization in 2011 as a mechanism to reduce public expenditures, solve state and local governments’ fiscal crisis, and eliminate allegedly excessive compensation of public employees by eliminating public employment. Privatization has been championed as a cost-effective alternative to services provided by public employees. According to the proponents of privatization, market forces can be harnessed to reduce costs and improve the quality of public services, by encouraging competitive bidding by innovative companies to supply services currently provided by inefficient public bureaucracies. About one-quarter of municipal public services in the USA are provided by corporations and non-profits (Warner and Bel 2007). Many current political analyses presume that privatization will inevitably produce costs savings.

This article seeks to evaluate the current research on public employee pay and privatization to answer the following questions: Have public employees been used as scapegoats for the many private and public policy failures that contributed to the financial crisis, the government budget shortfalls and the protracted economic contraction? Is there an established body of research that policy makers could have relied upon to shape recent public employee labour relations and privatization reforms? In Section 2, the article reviews the failures of national economic policy that motivated the debates about public employee compensation and privatization that has deflected efforts to hold those accountable for the numerous acts of corruption, policy failures and acts of fraud. In Section 3, the article will assess the recent studies since 2010 that have sought to inform the debate about public-sector employee compensation. In Section 4, the article will examine the current research on the privatization of public services and whether governments are securing lower costs and improved quality through privatization. In Section 5, the article will evaluate the research findings and their implications for future of public employment and public employee collective bargaining.

2. The economics and politics of the crisis

Since the summer of 2007, the US economy had contracted without any meaningful recovery for many Americans by 2011. While corporate profits returned to record levels, and the stock market had risen from its 2009 lows in 2011, workers’ income declined (Norris 2011), and the official unemployment rate, although declining, remained high, and the real unemployment rate exceeded 14 per cent, (which includes all those who want full-time work and who do not have it; US Bureau of Labor Statistics 2012). State tax revenues were substantially reduced because of the contraction in economic activity and significant reductions in private employment. While state revenue declined, annual state expenditures for Medicaid and unemployment insurance increased by an estimated US$6.5 billion because of the increases in unemployment (Holahan and Garrett 2009). The main budget problem, however, was reduced revenue. Since 2007, the state personal income tax revenue decreased by18 per cent by 2010, and the state corporate income tax revenue declined by 28 per cent with state sales tax revenue declining by 9 per cent. The revenue reductions from these three taxes accounted for US$101.2 billion in lost state and local revenue (US Census Bureau 2011), an amount equivalent to 2011 state deficits. The federal stimulus, the American Recovery and Reinvestment Act of 2009, partly offset these state tax reductions in Fiscal 2009 (US$31 billion), Fiscal 2010 (US $68 billion) and Fiscal 2011 (US $59 billion) (McNichol et al. 2011).

The state public-sector budget crisis emerged from a breakdown of a bipartisan policy consensus in how to respond to economic contractions. Historically, the federal government provided states temporary block grants to offset their revenue losses during a recession until a recovery was re-established, dating back to the Nixon administration. In 2011, a new Republican majority in the House of Representatives, however, blocked any further additional federal support for the states, unleashing a budget crisis in over 40 states that lead charges of excessive compensation of public employees as a cause of the crisis, demands for privatization to solve the budget shortfalls, and public employment reductions in excess of 655,000 jobs by the end of 2011 (US Bureau of Labor Statistics 2012).

While the states’ fiscal problems mainly arise from reduced tax revenue due to the contraction of economic activity and the expiration of federal stimulus support, none the less, states were required by their respective constitutions to balance their budgets. Without adequate state revenue to maintain state services, governors and legislatures turned their focus on expenditure reductions, particularly public employee compensation, which accounts for 44 per cent of state and local expenditures (McNichol 2011). Twenty-nine states had Republican governors in 2011, some of whom seized on the fiscal crisis as an opportunity to permanently hobble the Democratic Party by greatly weakening public-sector unions that tend to be reliable Democratic supporters. The Republican Party and allied organizations launched an all-out public relations assault on public employees, public-sector unions and collective bargaining.1

The Republican criticism of public employee collective bargaining was not informed by any blue ribbon commissions, scholarly analysis or public outcry. It became a politically convenient target to explain the dire condition of state and local government finances after the financial and economic crisis. In the anti-incumbent and the anti-Obama furore over bank bailouts, the General Motors and Chrysler nationalizations, and after Tea Party protests over healthcare reform, Republicans were swept into office at the federal, state and local level in 2010. Collective bargaining was not an election issue. Several of the most drastic reforms, for example, Wisconsin and Ohio, were not announced until after the legislative sessions began, when they were quickly rushed into law, it was expected, before the opposition could organize resistance.

3. Public employee compensation and collective bargaining

From the mid-1950s through the 1960s, public-sector pay rose relative to private-sector pay, while beginning in the mid-1970s, relative public-sector pay fell (Freeman 1985). The relatively high-paid public-sector workers of the early 1970s within the span of a decade lost their real compensation advantage over otherwise comparable private-sector workers, seriously denting if not destroying the picture of the ‘overpaid’ public employee that developed in the early 1970s. The groups of public-sector workers who tend to be most highly paid in the USA relative to private-sector workers are blacks and women, suggesting that the public sector discriminates less than does the private sector (Freeman 1985).

In recent years, however, there have been a plethora of studies comparing public- with private-sector earnings and compensation that have challenged the new portrait of public–private worker compensation comparability, and instead, these studies found that the overpaid public employee had returned. To support their proposed changes in public employee law and pay, conservative policy institutes such as the Mackinac Center in Michigan (Hohman 2010) and newspapers (e.g. Cauchon 2011) began publishing comparisons of private- and public-sector employee compensation, showing large public-sector premiums. These studies made simple comparisons of wages and total compensation averages for public- and private-sector employees, using data from the Commerce Department, Bureau Economic Analysis's (BEA) National Income and Product Accounts. The main problem with these studies is that they do not control for education level. The BEA data are comparing the average private-sector job with a worker who has a high school degree with the average public-sector employee who has a college education, and finds, unsurprisingly, that college-educated employees on average earn more than high school graduates.

Consequently, using the national BEA compensation data, USA Today (the largest circulating daily paper in the USA) reported that the average state and local public-sector job generates total compensation of US$57,775, which is about US$2,511 more than the average private-sector job (Cauchon 2011). As with all these BEA-based comparisons, USA Today failed to control for education, experience, hours of work, race, gender, ethnicity, disability or organization size. This was an exercise of comparing apples to oranges. Instead, what is needed is to compare apples to apples. If the BEA data comparisons were unsatisfactory, what is an appropriate comparison? Can empirical research answer whether state and local public employees are overpaid and could excessive state, and local government employee compensation be a major cause of the states’ fiscal problems?

Who and What Is to be Compared?

Ideally, research would compare workers performing similar work in the public sector with the private sector, but this is not always possible. There are too many critical occupations in the public sector, for example, police, fire and corrections, without appropriate private-sector analogues. Even private and public teaching is significantly different. Public schools accept all students, while private schools are sometimes highly selective and may exclude or remove any poor performers, special needs or disruptive students. Consequently, comparing workers of similar ‘human capital’ or personal productive characteristics and labour market skills is considered the best alternative and well accepted by labour economists. Analyses based on personal characteristics comparisons capture most of the important and salient attributes observed in the comparable work studies (Killingsworth 2002).

Since 2010, there have been over 50 wage estimates reported in policy papers and peer-reviewed research using human capital models that consistently show that state and local public employee wages are less than private-sector employee wages when holding education, experience, hours of work and other demographic variables constant. The results of these studies are reported in Appendix Table A1. While there is little dispute that state and local public employees earn lower wages, there has been a vigorous debate about how to evaluate their benefits and total compensation in relation to private-sector employees.

While there is a broad consensus on a public employee wage penalty, none the less, there are some disagreements about the appropriate wage equation specification involving whether union membership, employer size or occupation (which will be discussed further below) should be included in the human capital wage equation. Bender and Heywood (2010) include unionization in their specification. No other estimates include unionization; Gittleman and Pierce (2012) argue that it does not account for unobserved labour quality in the specification. While there may be an emerging consensus about union membership, there is much greater disagreement about employer size. Allegretto and Keefe (2010), Keefe (2010a, b, 2011a-j, 2012), Biggs and Richwine (2011a), Richwine and Biggs (2011a,), and Munnell et al. (2011) include employer size, while Schmitt (2010), Bender and Heywood (2010), and Gittleman and Pierce (2012) do not include employer size in their specifications.

The argument to include employer size in the comparisons is that it compensates for unobserved productive characteristics of labour. In the USA, large organizations, both public and private, spend considerable resources recruiting and selecting employees, monitoring employee performance, and designing jobs. Through their human resources departments, large firms and government entities recruit applicants and then follow elaborate procedures that may include conducting or commissioning aptitude and capability tests, physical evaluations, drug tests, medical screenings, background and reference checks, reviews of licenses and certifications, structured assessments and simulations, and a variety of other evaluations. Second, large organizations can realize substantial savings in the provision of benefits, particularly health insurance, where large firms self insure and escape the higher market costs of private insurance. Third, the nature of work is different in large organizations. It requires greater cooperation and teamwork, more submission to rules, and the need for conformance to those rules, being subjected to more performance and behaviour monitoring, and engagement with continuous and uninterrupted work flows. On the other hand, those opposing the inclusion of employer size in these wage equations underscore the traditional explanation that larger employers have greater product market power and that workers capture some of these rents, or in the public sector, these rents arise from taxpayers in return for employee and union political support. There is no empirical resolution to these two perspectives on employer size.

In regard to benefits, there is only one reliable source of benefit information in the USA: the Employer Costs for Employee Compensation (ECEC) survey, which is collected by the US Department of Labor, Bureau of Labor Statistics (BLS) as part of the National Compensation Survey (NCS). The ECEC includes data from both private industry and state and local government employees, and provides data for private employers by firm size. Larger employers, over 100 employees, are significantly more likely to provide employees with benefits, in part, because they can spread administrative costs over a larger group, and for insurance purposes, they can more readily diversify risks over a larger group. State and local governments resemble larger-size private employers. The national compensation cost analysis can control for employer size in making comparisons.

Benefits are also allocated differently between private- and public-sector full-time workers in the USA (see Table 1). State and local government employees receive a higher portion of their compensation in the form of employer-provided benefits, and the mix of benefits is different from the private sector. What is important when considering both the employer-provided benefits and direct pay is whether state and local government workers have a total compensation package that costs what they would receive if employed in the private sector. It is the total cost of compensation package — not the mix of cash and benefits — that is important in making a comparison.

Table 1. Comparisons of Private and Public Employee Compensation (Studies between 2009 and 2012)
Employer CostsPrivate EmployersGovernment
December-09State and Local
NationalEmployeesEmployeesEmployeesEmployeesEmployees
 All Sizes1 to 99100 to 499500+All
Total Compensation100.0%100.0%100.0%100.0%100.0%
Wages and Salaries69.6%73.7%70.2%66.9%65.9%
Total Benefits30.4%26.3%29.8%33.1%34.1%
Paid Leave6.9%5.5%6.9%8.6%7.6%
Vacation3.3%2.8%3.5%4.5%2.9%
Holiday2.2%1.9%2.2%2.5%2.3%
Sick1.1%0.6%0.8%1.1%1.9%
Personal0.4%0.2%0.3%0.4%0.5%
Supplemental Pay2.5%2.8%2.7%3.6%0.8%
Overtime0.8%0.8%1.1%1.0%0.4%
Shift Differential0.2%0.1%0.3%0.5%0.1%
Nonproduction Bonuses1.4%1.9%1.4%2.1%0.3%
Insurance8.8%6.7%8.6%9.0%11.6%
Life0.2%0.1%0.2%0.2%0.2%
Health8.3%6.3%8.0%8.3%11.2%
Short-term disability0.2%0.1%0.2%0.3%0.1%
Long-term disability0.1%0.1%0.1%0.2%0.1%
Retirement and Savings4.5%2.5%3.4%4.8%8.1%
Defined Benefit2.7%0.9%1.4%2.2%7.2%
Defined Contribution1.7%1.6%2.0%2.6%0.8%
Legally Required7.7%8.9%8.2%7.2%6.0%
Social Security4.5%4.9%4.7%4.6%3.6%
Medicare1.1%1.2%1.2%1.2%1.0%
Federal Unemployment Insurance0.1%0.2%0.1%0.1%0.0%
State Unemployment Insurance0.5%0.7%0.6%0.3%0.2%
Workers’ Compensation1.5%1.9%1.6%1.7%1.1%

The ECEC national data reported in Table 1 reveal some obvious differences between private and public employee compensation, when examining the provision of employee benefits. Public employers contribute on average 34.1 per cent of employee compensation expenses to benefits, whereas private employers devote between 26.1 per cent and 33.1 per cent of compensation to benefits, depending on the employer's size. Public employers provide better health insurance and pension benefits. Health insurance accounts for 6.3–8.3 per cent of private-sector compensation but 11.2 per cent of state and local government employee compensation. Retirement benefits also account for a substantially greater share of public employee compensation, 8.1 per cent compared with 2.8–4.8 per cent in the private sector. Most public employees also continue to participate in defined-benefit plans managed by the state, while most private-sector employers have switched to defined-contribution plans, particularly 401(k) plans. On the other hand, public employees receive considerably less supplemental pay and vacation time, and public employers contribute significantly less to legally mandated benefits. The ECEC data are used to mark up wages to generate employee compensation (see Lewin et al. 2012).

There are several factors that have been disputed that influence the appropriate valuation of public total employee compensation. Most studies find no excessive public employee compensation expenses (Allegretto and Keefe 2010; Bender and Heywood 2010; Keefe (2010a, b, 2011a-j, 2012); Munnell et al. 2011). These studies conclude that higher benefit costs are offset by lower public employee wages. However, there are critics of this majority view. One set of criticisms raised by Biggs and Richwine (2011b) and Richwine and Biggs (2011a) argues that the ECEC does not adequately account for the costs of state and local government retiree health benefits, the guaranteed nature of public-sector pensions, and the value of public-sector job security. When they adjust for these alleged omissions, they find that the public employees are excessively compensated by 30 per cent in California and 43 per cent in Ohio when compared with similar private-sector employees. A second line of criticism focuses the human capital model, using a job evaluation method instead or a human capital model with occupational controls. These job evaluation and occupation supplemented models reveal a significant compensation premium for public employees from 3.2 per cent for state employees and 10.5 per cent for local government employees (Gittleman and Pierce 2012). Each of these criticisms will be addressed below.

One set of criticisms focus on several shortcomings of the ECEC benefit accounting, for example, the possible omission of retiree health benefits. While some states pre-fund retiree health benefits, most states have pay-as-you-go retiree healthcare financing. This means that each year, a state must allocate funds from its operating revenue to pay for retiree healthcare. The ECEC does not account for these expenditures because they are not reflected in current employee costs. The US General Accounting Office (GAO) (2007) estimated that retiree health benefits cost states approximately 2 per cent of salary or 1.5 per cent of total compensation. The basic premise of the Biggs and Richwine (2011b) criticism is that retiree health insurance is an irrevocable and unalterable right, which is mandated to be funded by the state irrespective of any changes in the labor force or the state's finances. This premise is false. In most states, public employee retiree healthcare is not a guaranteed benefit. Instead, an accurate assessment of public and private employee benefits does require a small upward cost adjustment where the entity provides retiree health benefits on a pay-as-you-go-retiree health insurance. A second criticism offered by Biggs and Richwine involves the overstatement of the public pension funding ratios. Munnell et al. (2011) summarize the problem as follows:

Comparing ECEC pension data across the public and private sectors involves two problems. First, the ECEC contributions to defined benefit pension plans do not separate the normal cost and the amortization payment to reduce unfunded liabilities. As the employee only earns the normal cost, including the amortization payment overstates public sector compensation. Second, contributions to private sector 401(k) plans and public sector defined benefit plans are not comparable. The public sector contribution guarantees a return of about 8 percent, whereas no such guarantee exists for 401(k)s. Thus, the public sector contribution understates public sector compensation (p. 5).

After making the appropriate adjustments in the ECEC for the proper valuation of pensions and retiree health insurance, Munnell et al. (2011) report that the two roughly balance out. Their estimated difference nationwide for total compensation is a 4 per cent premium in favour of private-sector workers.

Finally, Munnell et al. (2011) and Keefe (2011a) conclude that there is no compensating benefit to job stability in the public sector as alleged by Biggs and Richwine (2011b) and Richwine and Biggs (2011a), as the greater job stability in the public sector is consistent with the higher levels of education of the public employee workforce. Higher levels of education are associated with significantly lower rates of unemployment in US labor markets.

The alternative method used to evaluate compensation is the job evaluation method, which scores jobs based on a variety of compensable factors, and then uses a labor market survey of jobs to evaluate compensation. The BLS collects this type of data in the NCS, which is used to evaluate federal civilian compensation in comparison with private-sector pay. The survey collects information using the employer's most narrow occupational classification or job title and on individuals’ earnings, job work schedules and job work levels. NCS interviewers assign a level of work to all jobs in the survey, which ranges from 1 to 15, corresponding to pay levels in the general schedule that sets levels of pay for federal workers. Work levels and occupations serve as a substitute for education level and experience in the job evaluation comparison method.

Using NCS micro data, Gittleman and Pierce (2012) estimate a model that includes detailed occupational and work-level variables which shows that state government employees earn wages 2.3 per cent below private-sector workers, but total compensation 8.7 per cent above private-sector workers, whereas local government employees earn both higher wages (9.2 per cent) and total compensation (17.6 per cent). The NCS estimate excluded uniquely public occupations where there were no matching private-sector workers. The largest shared public–private occupations, however, tend to be low-wage and low-skilled occupations, such as janitors, general clerks, bookkeepers and secretaries. These occupations are better paid with benefits in the public sector, which sets a floor on wages and benefits. The occupation controls therefore biases their estimates, as the higher-wage and higher-skilled occupations are not shared between the public and the private sector, where there is a substantial public employee penalty. Furthermore, the NCS micro data are not publicly available, which prevents an examination of the drivers of the job evaluation model results.

Their research also estimates a hybrid human capital model with occupational controls that produce state government worker wages that were 4.9 per cent below private-sector wages and local government employee wages that were 3.5 per cent higher than private-sector earnings. This model is a hybrid as it controls for both human capital and detailed occupation. The authors reveal, however, that when examining occupations at the two-digit Standard Occupation Classification that are within the education occupational group, employment is relatively concentrated in kindergarten and preschool for the private sector, in primary and secondary teaching for local government, and in postsecondary teaching for state government. Because education accounts for 54 per cent of state and local public employment, this control significantly biases the occupational control estimate. Similarly in protective service occupations, professional police, detectives and firefighters are employed in the public sector, while low-wage private security guards are employed in the public sector. These controls along with social service occupations force equality where there is none, probably biasing their estimates. Another criticism of using occupations in a human capital model is that education and experience already control for occupational selection, and therefore occupation controls are redundant, which would not be a problem if there was a full occupational match across sectors. Hopefully, further research can clarify the discrepancies between these two basic approaches in evaluating compensation.

Relative Wage Compression in the Public Sector

Since 1970, however, there has been a significant relative compression of the wage distribution in the public sector (Borjas 2002). It is well known that public-sector earnings show less dispersion than private-sector earnings do. Thus, individual earnings differentials favour the public sector at the bottom of the earnings distribution and favour the private sector at the top of the distribution (Belman and Heywood 2004). Using quantile regression on CPS data with occupational controls, Gittleman and Pierce (2012) report that below the median wage, there is a public pay premium for state and local government workers, but, at the seventy-fifth and ninetieth percentiles, the private-sector premium is 7.9 and 11.7 per cent, respectively, relative to state government and 3.4 and 9.0 per cent, respectively, versus local government. However, Lewin et al. (2012), using a standard human capital model with size controls, find that the median hourly compensation is 2 per cent lower for state and local public employees, and at the ninetieth percentile, the penalty rises to 8.4 per cent, whereas at the tenth percentile, there is public employee premium of 3.3 per cent. There is no dispute that lower-skilled and less educated workers in the public sector are compensated better than their private-sector counterparts, while, on the other hand, more skilled and better-educated workers in are more highly compensated in the private sector.

This compensation structure creates possible opportunities for cost savings in government by privatizing lower-skilled, less educated and relatively higher-paid public employee work, while in-sourcing higher-skilled, more educated, and relatively lower-paid public employee work. Advocates of privatization tend to focus on lower-skilled work either to use the threat for privatization to reduce public employee compensation or to privatize that work. However, these same politicians rarely consider in-sourcing higher-skilled work either because they believe that the government gets better quality performance from private vendors or because professional services firms in law, accountancy, information technology and engineering are active in politics and provide substantial sources of local political contributions for both political parties (Keefe and Fine 2010). None the less, calls for privatization became widespread in 2011 as a mechanism to reduce public expenditures, solve state and local governments’ fiscal crisis, and eliminate allegedly excessive compensation of public employees.

4. Privatization's successes and failures: the evidence2

Privatization in the USA usually means government ‘contracting out’ or ‘outsourcing’ to a for-profit firm or a non-profit organization to produce or deliver a service or the sale or lease of a publicly owned asset. Privatization encompasses a wide variety of methods and forms, including the sale of public assets, contracting out, deregulation, franchises, grants and subsidies, private donations, service shedding, volunteerism, vouchers, self-service, and user fees (Brudney et al. 2005; International City/County Management Association 1989; Miranda and Lerner 1995; Savas 2000).

Historically, the academic debate on privatization has been highly ideological (Warner and Bel 2007), relying primarily on case studies with proponents finding cost saving efficiencies (Eggers and O'Leary 1995; Savas 2000) and detractors reporting cost overruns, corruption, erosion in wages and the elimination of citizen voice (Hebdon 1995; Sclar 2000; Starr 1988). Many of the current political analyses presume that privatization will inevitably produce costs savings. The current empirical research on privatization, however, which has been largely ignored, suggests otherwise. The record of empirical research does indicate that there may have been substantial savings arising from privatization in the 1970s and 1980s. For example, the Reason Foundation's research summary table (derived from John Hilke's book Competition in Government Financed Services, published by Quorum Books in 1992) is based on studies from this period. Literature reviews evaluating privatization projects from this period by Domberger and Rimmer (1994) and Domberger and Jensen (1997) also concluded that privatization was linked to cost savings.

More rigorous and comprehensive evaluations of privatization projects undertaken since 1990, however, do not find significant benefits from privatization. Meta-analyses in more recent studies, such as those conducted by Boyne (1998) and Hodge (2000), emphasize that the evidence is mixed, and a systematic relation between private production of public services and cost savings cannot be demonstrated. More recent studies of privatization of public services are less likely to find cost savings from privatization, possibly because the projects that were going to yield the most benefit were already privatized. In other words, the low-hanging fruit may have already been picked for privatization. On average, local municipal governments have privatized one-quarter of their public services (Warner and Bel 2007).

The research literature increasingly questions the benefits of privatization. For example, Bel and Warner (2006) review all econometric studies of costs for waste collection and efficiency for water distribution from 1965 to the present and find that the majority of studies report no difference in costs and efficiency or productivity between public and private production. Similarly, Cutler and Horwitz (2000) show how not-for-profit hospitals imitate the insurance reimbursement practices of hospitals that converted to for-profit operations to pursue more efficacious financial performance often, at least, partly derived from more aggressive insurance and Medicare reimbursement practices. Likewise, Zullo (2008) detects no immediate or long-term economic benefit from contracted bus services. Studies from the early 1980s reported savings from contracting urban bus operations; however, Leland and Smirnova (2009) replicating that research find privately owned and managed transit systems are no longer more efficient or effective than government-owned agencies. They conclude that this occurred for several reasons, which may apply more broadly to privatization. First, without any serious competition, private transit services remain a monopoly and operate under the same conditions as public providers. Second, private firms may have higher transaction costs in their financing and business activities that outweigh any initial cost savings. Third, over time, the pressure from the public may have intensified, and private providers may have had to adapt to public demands requiring them to operate with similar constraints as public providers. This would also explain the rapid decrease in the sheer number of private providers. If service provision is no longer profitable, then many private companies simply have left the market. Brudney et al. (2005) investigate privatization of service delivery by state government agencies. Contracting out for the delivery of services by state governments is very common, employed by more than 70 per cent of responding agencies. State agencies, however, do not seem to achieve their main goals that are advocated by proponents of contracting out, barely one-third report decreased service costs.

More generally, a variety of explanations have been advanced to explain the diminishing returns to privatization. First, government, itself, uses a range of tools to achieve cost savings. Public managers have become more sophisticated in the use of these tools, which not only include privatization of services to for-profit and non-profit organizations but also mixed private–public undertakings, intergovernmental cooperation, private–public competitive bidding, process improvement, incentive compensation plans for public employees, benchmarking, and reverse contracting (in-sourcing). Second, the monitoring and contracting costs for privatization can be as high as 20 per cent, often making privatization an uneconomical alternative. Third, competitive bidding markets for government contracts often do not exist. Few contractors have the capability to undertake many government services being contracted. Most governments do not face a competitive market of alternative suppliers. Market competition also erodes because of incumbency — contracts are typically renewed as other providers exit the market. Fourth, research has shown that private contractors collude, and price differences erode despite government regulation to ensure competition and price policies to ensure cost efficiencies (Bel and Warner 2007).

Scholars have concluded that privatization and market failures can lead to reductions in service quality and lack of cost savings. These failures are the primary reasons for ‘reverse privatization’ (Hefetz and Warner 2004, 2007), which occurs when contracted work is brought back into the governmental entity from for-profit providers, non-profit providers or other governmental units. Mildred Warner (2008a), the leading academic analyst of privatization, reports data from a 2002 International City/County Management Association (ICMA) survey of local governments that shows that poor service quality, insufficient savings and improved government efficiency were the leading causes for reverse contracting.

Warner and Hebdon (2001) find that reverse privatization, or contracting back in previously contracted services, is a logical consequence of privatization. Change in government management capability, monitoring difficulties and principal-agent problems are most important in explaining contracting back-in. Professional government managers often find that the best value is obtained by the public entity (Hefetz and Warner 2004, 2007). In many of the cases, internal process improvements undertaken by labor management cooperation are associated with contracting back-in (Hefetz and Warner 2004). Contracting back-in may reflect market success where competition increases the efficiency of the public entity when confronted with privatization and job losses. In other cases, it reflects the failure of markets to meet desired outcomes or failure of government to adequately manage and monitor contracts (Sclar 2000). This process of reverse contracting is growing in the USA (Hefetz and Warner 2007).

Importance of Reverse Contracting

Using survey data on 628 governments in the 1990s, Hefetz and Warner (2004) report that 93 per cent contracted out at least one service, while 81 per cent of these governments contracted back-in at least one service. Almost three-quarters of governments engaged in both new contracting out and contracting back-in. These findings challenge the adequacy of a singular focus on contracting out. On average, most governments both contract out and contract back-in services. There are potential advantages for in-sourcing current privately contracted work. For example, government has a substantial compensation advantage in supplying its own professional work. State and local governments pay their professional employees considerably less than the private sector, giving it a substantial economic advantage in providing professional services, such as engineering (Keefe and Fine 2010).

Furthermore, there are numerous difficulties in the privatization process, including the specification of contracts that lead to reverse privatization. Significant technical and auditing costs are associated with monitoring contracts, which are seldom taken into account in the privatization literature (Prager 1994). Monitoring costs may be as much as 20 per cent of the total costs of contracting out (Warner and Hebdon 2001). At the municipal level of government, reverse privatization was most common in service areas where privatization was high (public works, transportation, health and human services, and parks and recreation). The reverse privatization reflects the difficulties in monitoring quality of services that are hard to specify, and the difficulty in structuring competition between and among private suppliers to ensure efficiency and, thus, relying on competition from the government to gain efficiency (Warner and Hebdon 2001).

Privatization has proven to be unstable and has not delivered the promised cost savings. The real challenge for government is to promote process improvement. This requires an internal focus within government and careful attention to management (Warner 2008b). The process of outsourcing and then reverse contracting may involve substantial costs to the public and disruptions to the employment of public employees.

Growth in Privatization Has Stalled

As a result of increased government efficiency, reverse contracting, and market failures, the shift toward privatization has stalled; government service delivery remains the dominant method in the provision of three-quarters of local public services in the USA. The 2007 ICMA survey shows that direct public delivery is still the most common form of service delivery at 52 per cent of all service delivery across all local governments on average. Intergovernmental contracting at 16 per cent and for-profit privatization at 17 per cent are the most common alternatives to direct public delivery. Non-profit delivery at 5 per cent is next, and franchises, subsidies and volunteers collectively account for less than 2 per cent of service delivery. Compared with 2002, the levels of for-profit privatization and non-profit contracting are flat, and intergovernmental contracting rose from 11 per cent to 16 per cent of service delivery. Direct public delivery fell from 59 per cent in 2002 to 52 per cent in 2007, but this fall was offset by an increase in intergovernmental delivery. Averaged across all governments and all services, the trends in local government service delivery are relatively unchanged (Warner and Hefetz 2008).

Public versus Private Competitive Bidding with Standards

Many privatization advocates in the USA believe that competitive bidding between public and private providers can ensure competitive pricing. Competitive contracting by the employees in a public agency is required by many governments as part of the privatization decision process. Competitive contracting is common in the United Kingdom, New Zealand and Australia, and is used to ensure ‘contestability’ in numerous limited competitive market situations (Boyne 1998; Martin 1999; Osborne and Plastrick 1997; Young 1992). Competitive bidding has become standard in some cities, such as Phoenix, Indianapolis and Charlotte (Martin 1999). In competitive bidding, incumbent at-risk employees through their union and in collaboration with public managers are given the freedom to redesign work processes that often results in internal efficiencies greater than those achieved through privatization (Appelbaum and Batt 1994; Ballard and Warner 2000; Martin 1999).

The US federal government now requires a public incumbent employee bid for a competitive contracting process. Federal employees won 90 per cent of all competitions conducted under the regulations in the Office of Management and Budget. When allowed to make improvements and compete, public-sector employees have done well. More importantly, these results demonstrate that the public sector is not inferior to the private sector when there is head-to-head competition (Dannin 2006). Coupled with other reforms, for example, one that allows departments to reinvest savings into improved technology, competitive bidding can further efficiency gains and reduce two major sources of public-sector inefficiency: outdated technology and rigid organizational management systems (Warner and Hefetz 2002). As in any employment situation, employees’ desire to maintain and secure their jobs often becomes the chief motivation in their willingness to engage in productivity bargaining and process redesign.

Advocates of privatization correctly observe that civil service system replaced the spoils system by protecting public employees from politically motivated management actions, but today, they claim that civil service regulations frustrate good management. What they fail to acknowledge is that it still protects workers from their politically appointed executives, who would often prefer to use their employees’ work time for political rather than public purposes. Advocates incorrectly assert that several decades of a parallel system of collective bargaining emerged to protect employees, rendering the civil service system largely redundant. For the most part, even though there are tensions between the two, the two systems complement each other. The greatest problem that public managers encounter with civil service is the difficulty in dismissing poorly performing employees, which can be easily fixed with an incremental approach to civil service reform. It would make sense to move all discipline and dismissal cases, wherever possible, into the collectively bargained grievance-arbitration system and out of the cumbersome civil service hearing procedure, where a single well-established ‘just cause’ standard could be applied to all disciplinary and dismissal cases. This would greatly improve public managers’ ability to take corrective action up to and including dismissals. The relatively few cases of public corruption involving public employees (as opposed to elected officials), however, should be an indicator of the civil service's success. Given the history of public corruption, it would seem unwise to dismantle civil service, as being considered in a number of states.

The recent proposals and debates about privatization have been largely shaped by the fiscal crisis of states. Seizing a crisis opportunity, many politicians have championed privatization as a solution to their financial problems and to redress alleged overcompensation of public employees who receive more generous health and pension benefit than private-sector employees. What is often underestimated by these privatization advocates is the costs of effective monitoring that can largely overwhelm any benefits of privatization, and the costs of ineffective monitoring are corruption and failed savings. More than 40 years of privatization and reverse privatization indicates that a relative equilibrium has been achieved, and no easy cost-savings or quality improvements are readily available to governments.

5. Conclusion

Overall, the research literature does provide reliable evidence that could be used by policy makers. On balance, the research does not indicate that there is a public employee compensation premium. Public employees earn lower wages and receive better benefits. There is considerable compression in public-sector compensation structure. These findings should not be surprising. Politicians have strong incentives and tools to resist above market public employee compensation. In most states, public employee compensation is disclosed and is open to public inspection. Furthermore, a large segment of the US public has demonstrated the ability to resist tax increases to fund overly generous collective bargaining agreements or services. Because government budgets are complex and the sources of revenue for a municipality are many — federal, state, local taxes, transfers and fees — some analyst incorrectly forecasted that the citizenry will prefer stable and uninterrupted services rather concern themselves with costs, tax increases and budgetary discipline. In addition, there are well-organized business interest groups that continually seek the privatization of public services. Combined these forces exert considerable countervailing power on public employee unions in collective bargaining.

The research literature also indicates that privatization can be costly and may have reached a point of diminishing returns for several reasons. First, public managers have become better managers using a variety of tools to achieve cost savings. Second, government has used a variety of institutions to improve performance including mixed private–public undertakings, intergovernmental cooperation, private–public competitive bidding, process improvement, incentive compensation plans for public employees, benchmarking and reverse contracting (in-sourcing). Third and most importantly, the monitoring and contracting costs for privatization can be as high as 20 per cent, often making privatization an uneconomical alternative. Fourth, competitive bidding markets for government contracts often do not exist. Few contractors have the capability to undertake many government services being contracted. Market competition also erodes due to incumbency — contracts are typically renewed as other providers exit the market. Fifth, research has shown that private contractors collude, and price differences erode despite government regulation to ensure competition and cost efficiencies (Bel and Warner 2007).

Finally, the research shows that states’ fiscal crises did not arise because of excessive spending. State tax revenues were substantially reduced because of the contraction in economic activity and significant reductions in private employment. While state revenue declined, annual state expenditures for Medicaid and unemployment insurance increased. The main budget problem, however, was reduced revenue. The crisis induced reductions of state tax revenue coupled with the elimination of federal stimulus support in the American Recovery and Reinvestment Act of 2009 created the fiscal crisis in most states resulting in public employment reductions in excess of 655,000 jobs by the end of 2011 (US Bureau of Labor Statistics 2012) and demands for compensation concessions.

Unfortunately, the state budget, public employee compensation or privatization public policy debates have not been based on evidence-based research. In fact, most of the American media treats evidence-based research findings merely as another point of view among many points of view when informing the interested public about these issues. So while the recent research literature does provide reliable evidence that could be used by policy makers for evaluating public employee compensation and privatization alternatives, there is little recent policy making to indicate that systematic evidence can overcome a good anecdote in persuading policy makers to use research findings as a guide in their decision making.

State and local governments also continue to face fiscal challenges, and these could induce them to make further cuts. In this respect, valuing deferred compensation (pensions and retiree health benefits) involves the greatest compensation challenge for state and local governments. For the most part in the USA, these issues of deferred compensation are not subjects of public-sector collective bargaining but are legislated. Although public employee defined benefit pension systems have a long stable history, their managers have progressively shifted to riskier investment portfolios to generate higher on average returns to reduce employer-required contributions (Andonov et al. 2012; Mohan and Zhang, 2012). The present financial crisis may, however, significantly impair their financial performance and reintroduce the meaning of risk to pension managers. These poor results may require greater employer and employee contributions in the future coupled with possible benefit reductions and prolonged work lives. This may also give impetus to conversions to define contribution plans, such as 401k plans, which as a public policy have failed to adequately prepare employees for old age and retirement. Coupled with the willingness of governments (and others) to discount the evidence on public-sector pay, benefits and privatization, it would seem that the future will remain uncertain for public-sector workers and their unions.

Acknowledgements

This article was greatly improved by comments provided by John Godard and two anonymous editors.

Notes

  1. 1

    See, for instance, speeches by Governor Chris Christie of New Jersey, Governor Mitch Daniels of Indiana, Former Governor Tim Pawlenty of Minnesota, and Former Governor Mitt Romney of Massachusetts. In addition, see Governor Scott Walker of Wisconsin in his Wall Street Journal Op-ed and Governor Rick Snyder of Michigan report on the financial health of Michigan. Citations:Politico quoted in ‘Gov. Daniels Bashes Public Employees as “A New Privileged Class.”’ Pat Garofalo on June 7, 2010 at 11:16 am. http://www.wonkroom.thinkprogress.org/2010/06/07/daniels-public-pay/‘Gov. Pawlenty: Public employees are “over-benefited and overpaid”’ Joe Kimball, April 30, 2010, 9:13 am. MinnPost.com. http://www.minnpost.com/politicalagenda/2010/04/30/17788/gov_pawlenty_public_employees_are_over-benefited_and_overpaidGovernor Chris Christie addresses the NJCM at the Annual Luncheon Meeting in Atlantic City. Transcript, http://njcm.org/Conference2010. New Jersey Conference of Mayors.‘Mitt Romney blames the US budget deficit on overpaid government workers.’ Posted on December 13, 2009 by http://www.politicususa.com/en/Romney-Meet-The-Press.Scott Walker, Op-Ed., “Why I'm Fighting in Wisconsin,” WALL. ST. J., Mar. 10, 2011, at A17, available at 2010 WLNR 4819853.“Dollars and Sense: How State and Local Governments in Michigan Spend Your Money.” 2011 “Citizen's Guide to Michigan's Financial Health.” Presented by Governor Rick Snyder January 31, 2011.

  2. 2

    This section is based on Keefe and Fine (2010).

Appendix: Appendix

Table A1. Estimates of Public Employee Wage and Compensation: Penalty or Premium Since 2010
 WagesCompensationSpecificationDependent ln(Wage)DataAuthor (Year)Study
  1. **p < 0.01; ***p < 0.001.
United States       
State & Local Government       
 −9.5% **−4.0%Educ, Size Age DemoAnnualCPS SUPP 2006– 2010 + ECECMunnell et al. (2011)Comparing Compensation: State-Local Versus Private Sector Workers
 −6.4% **−3.8%Education AgeHourlyCPS MORG 2005– 2009Thompson & Schmitt (2010)The Wage Penalty for State and Local Government Employees in New England
 −3.7% ** Education Age DemoHourlyCPS MORG 2005–2009Schmitt (2010)The Wage Penalty for State and Local Government Employees
 −8.5% **−2.6%Educ age demo, hrsAnnualCPS MORG 2006– 2010 & ECECKeefe (2012a)Are Public Employees Overpaid?
 −5.8% **−5.6% **Educ age demo, hrsAnnualCPS SUPP 2005– 2010 & ECECKeefe (2012a)Are Public Employees Overpaid?
 −6.7% **−0.9%Educ age demo, hrsAnnualACS 2007–2009 & ECECKeefe (2012a)Are Public Employees Overpaid?
State Government Employees       
 −11.0% **−6.8% **Educ, age, union, demoHourlyCPS MORG 1983– 2008 + ECECBender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
 −16.7% **3.2%Restricted OccupationsWeeklyNCS-CPS MORG 2009Gittleman & Pierce (2012)Compensation for State and Local Government Workers
 −13.7% Education Age DemoAnnualCPS SUPP 2006– 2010Biggs & Richwine (2011b)Comparing Federal and Private Sector Compensation
 −8.5% **−4.6% **Educ age demo, hrsAnnualCPS MORG 2006– 2010 & ECECKeefe (2012a)Are Public Employees Overpaid?
 −5.8% **8.3% **Educ age demo, hrsAnnualCPS SUPP 2005–2010 & ECECKeefe (2012a)Are Public Employees Overpaid?
 −6.7% **1.7%Educ age demo, hrsAnnualACS 2007–2009 & ECECKeefe (2012a)Are Public Employees Overpaid?
Local Government Employees       
 −12.0% **−7.4% **Educ, age, union, demoHourlyCPS MORG 1983– 2008 + ECECBender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
 −13.6% **10.5% **Restricted OccupationsWeeklyNCS-CPS MORG 2009Gittleman & Pierce (2012)Compensation for State and Local Government Workers
 −6.4% Education Age DemoAnnualCPS SUPP 2006–2010Biggs & Richwine (2011b)Comparing Federal and Private Sector Compensation
 −8.5% **−1.5%Educ age demo, hrsAnnualCPS MORG 2006– 2010 & ECECKeefe (2012a)Are Public Employees Overpaid?
 −5.8% **−4.1% **Educ age demo, hrsAnnualCPS SUPP 2005– 2010 & ECECKeefe (2012a)Are Public Employees Overpaid?
 −6.7% **−0.2%Educ age demo, hrsAnnualACS 2007–2009 & ECECKeefe (2012a)Are Public Employees Overpaid?
Specific States       
Connecticutt−2.1% Education AgeHourlyCPS MORG 2005– 2009Thompson & Schmitt (2010)The Wage Penalty for State and Local Government Employees in New England
Massachusetts−3.7% ** Education AgeHourlyCPS MORG 2005– 2009Thompson & Schmitt (2010)The Wage Penalty for State and Local Government Employees in New England
Arizona−12.7% ***−3.61%Educ, age, size, demo, hrsAnnualCPS SUPP 2005– 2010 & ECECKeefe & Wells (2012)Are Arizona Public Employees Over Compensated?
Arizona State−14.34% ***−5.75%Educ, age, size, demo, hrsAnnualCPS SUPP 2005– 2010 & ECECKeefe & Wells (2012)Are Arizona Public Employees Over Compensated?
Arizona Local−11.71% ***−2.34%Educ, age, size, demo, hrsAnnualCPS SUPP 2005– 2010 & ECECKeefe & Wells (2012)Are Arizona Public Employees Over Compensated?
California−6.4% ***2.3%Educ, age, size, demo, hrsAnnualCPS SUPP 2005– 2010 & ECECAllegretto & Keefe (2010)The Truth about Public Employees in California: They are Neither Overpaid nor Overcompensated
California−3.0%30.0%Education Age DemoWeeklyCPS SUPP 2005– 2010 & ECECRichwine & Biggs (2011b)Are California Public Employees Overpaid? Heritage Foundation Working Paper
California State−9.8% ** Educ, age, union, demoHourlyCPS MORG 2000– 2008Bender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
California Local−6.1% ** Educ, age, union, demoHourlyCPS MORG 2000– 2008Bender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
Florida State−4.8% ** Educ, age, union, demoHourlyCPS MORG 2000– 2008Bender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
Florida Local−0.2% ** Educ, age, union, demoHourlyCPS MORG 2000–2008Bender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
Indiana−11.4% ***−5.9% **Educ, age, size, demoHourlyCPS SUPP 2005– 2010 & ECECKeefe (2011g)Are Indiana Public Employees Over-compensated? 02/10/11.
Illinois State−12.5% ** Educ, age, union, demoHourlyCPS MORG 2000–2008Bender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
Illinois Local−13.3% ** Educ, age, union, demoHourlyCPS MORG 2000–2008Bender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
Iowa All Men−11.8% **−7.9% **Educ, age, union, demoHourlyCPS SUPP 2000–2010Cannon (2011)Apples to Apples: Private-Sector and Public-Sector Compensation in Iowa
Iowa All Women−16.2% **−10.8% **Educ, age, union, demoHourlyCPS SUPP 2000–2010Cannon (2011)Apples to Apples: Private-Sector and Public-Sector Compensation in Iowa
Kentucky−18.2% ***−9.2% ***Educ, age, size, demo, hrsHourlyCPS SUPP 2000–2010Keefe (2012b)Public Versus Private Employee Costs in Kentucky: Comparing Apples to Apples
Kentucky State−16.3% ***−8.1% ***Educ, age, size, demo, hrsHourlyCPS SUPP 2000–2010Keefe (2012b)Public Versus Private Employee Costs in Kentucky: Comparing Apples to Apples
Kentucky Local−20.0% ***−10.2% ***Educ, age, size, demo, hrsHourlyCPS SUPP 2000–2010Keefe (2012b)Public Versus Private Employee Costs in Kentucky: Comparing Apples to Apples
Michigan−8.7% ***−2.9%Educ, age, size, demo, hrsAnnualCPS SUPP 2005–2010 & ECECKeefe (2011j)Are Michigan Public Employees Over-compensated? 02/03/11.
Michigan State−10.1% ** Educ, age, union, demoHourlyCPS MORG 2000–2008Bender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
Michigan Local−11.2% ** Educ, age, union, demoHourlyCPS MORG 2000–2008Bender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
Minnesota−12.3% ***−7.9% ***Educ, age, size, demo, hrsAnnualCPS SUPP 2005–2010 & ECECKeefe (2011e)Are Minnesota public employees overcompensated? 03/03/11
Missouri−20.0% ***−15.6% ***Educ, age, size, demo, hrsAnnualCPS SUPP 2005–2010 & ECECKeefe (2011d)Are Missouri public employees overcompensated? 03/03/11
New Jersey−3.6%*0.0%Educ, age, size, demo, hrsAnnualCPS SUPP 2005–2010 & ECECKeefe (2010b)Are New Jersey Public Employees Overpaid? 07/30/10. Economic Policy Institute
New York State−7.0% ** Educ, age, union, demoHourlyCPS MORG 2000–2008Bender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
New York Local−5.9% ** Educ, age, union, demoHourlyCPS MORG 2000–2008Bender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
Ohio−3.3%*−3.5%*Educ, age, size, demo, hrsAnnualCPS SUPP 2005–2010 & ECECKeefe (2011i)Are Ohio Public Employees Over-compensated? 02/10/11.
Ohio−2.5%43.0%Education Age DemoWeeklyCPS SUPP 2006–2010Biggs & Richwine (2011b): Public workers make Public vs. Private Sector Compensation in Ohio43 percent more in total compensation than their private-sector colleagues
Pennsylvania−8.7% ***−2.1%Educ, age, size, demo, hrsAnnualCPS SUPP 2005–2010 & ECECKeefe (2011a)Public Versus Private Employee Costs in Pennsylvania Comparing apples to apples.
Pennsylvania State−4.5% ** Educ, age, union, demoHourlyCPS MORG 2000–2008Bender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
Pennsylvania Local−12.9% ** Educ, age, union, demoHourlyCPS MORG 2000–2008Bender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
Texas State−16.6% ** Educ, age, union, demoHourlyCPS MORG 2000–2008Bender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
Texas Local−17.6% ** Educ, age, union, demoHourlyCPS MORG 2000–2008Bender & Heywood (2010)Out of Balance? Comparing Public and Private Sector Compensation over 20 Years
Wisconisn−10.7% ***−4.8% **Educ, age, size, demo, hrsAnnualCPS SUPP 2005–2010 & ECECKeefe (2011h)Are Wisconsin Public Employees Over- compensated? 02/10/11.
Region       
New England−5.5% **−3.5%Education AgeHourlyCPS MORG 2005–2009 & ECECThompson & Schmitt (2010)The Wage Penalty for State and Local Government Employees in New England
Teachers       
 −12.1% *** Education Age Demo, hrsWeeklyCPS MORG 2006–2010Allegretto, Corcoran & Mishel (2011)Teacher Penalty Update Through 2010
 −19.0% ***52.0%Educ Size, AFTQ, demoAnnualCPS SUPP 2006–2010 NLSY90-94Richwine & Biggs (2011a)Assessing the Compensation of Public-School Teachers Heritage

Ancillary