Government only helps wage disparity
In a new report, the United Nations points out that governments need to take more action against economic inequality. But commentator Will Wilkinson says the government plays a big role in maintaining that disparity.
Commentator Will Wilkinson (The Cato Institute)
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TEXT OF COMMENTARY
Scott Jagow: A new report from the United Nations has this idea in it: a minimum wage for all the world's poor. I don't know exactly how that would work, but the U.N.'s point is this: Governments need to take more action against economic inequality. Especially in light of food and energy prices.
But in this country, commentator Will Wilkinson says there's another kind of disparity, and the government isn't helping.
Will Wilkinson: When we think of rising income inequality, it's the geek lords of Silicon Valley and the Manhattan hedge fund titans who come first to mind. What's less often considered is the federal government's major role in comforting the already comfortable. The politically-connected classes in and around Washington, D.C., have fared rather handsomely over the past few years. Signs of recession you say? Not so much here on K Street.
After the tech bust of 2001, incomes in Silicon Valley and New York City drifted closer to the national average, and inequality between American counties declined. But then with the advent of the Global War on Terror, the District of Columbia and surrounding counties began to enjoy outsized gains in average incomes.
So far, the "military-industrial complex" is the one clear winner in what has been a $1 trillion war. But it's not only security and defense contractors, and the lobbyists who love them, who've been pulling ahead on the taxpayer dime.
According to the U.S. government, compensation for the average federal civilian worker in 2005 stood at over $106,000. That's double the average for private workers. That's top 5 percent of the personal income distribution. And average wages for a federal worker rose 5.8 percent that year, compared to a 3.3 wage hike in the private sector.
But who knows? Maybe all these new federal office buildings really are hives of extraordinary productivity. In San Jose, they make software, in Detroit, they make cars, and here in D.C., we make memos about meetings about regulations -- very efficiently. Maybe we Washingtonians deserve our good fortune.
Alas, according to a recent Pew Research poll, the federal government's favorability rating has plummeted to a 10-year low. If taxpayers are getting what we're paying for, we don't seem to know it.
But, hey, you just wait until the next guy gets into the White House. He's really gonna clean this place up.
Jagow: Will Wilkinson is a research fellow at the Cato Institute.
Comments
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07/09/2008
There are overpaid and underpaid workers both in government and private industry. I don't hear the author complaining about all of those executives in private industry being paid, not earning, outrageous salaries. Compare the salaries of government executives including Congress and the President to what corporate officers are paid. In comparison to private industry government executives get paid a pitance for the level of responsibility they have.
From TX, 07/08/2008
As someone from the private sector who has had occasion to work with government at several levels and who is helping foot the bill for the pay hikes you think you deserve, I figured I'd weigh in on this discussion.
First of all, I see two points being made by those with dissenting opinions - one is that government employees are highly educated and deserve their compensation and the second is that studies show civil salaries to be in middle of private pay scales.
To the first point, I have seen more brilliant, highly educated and ineffective people in government than anywhere save academia. (Incidentally, I see more brilliant people in industry, they're just not ineffective.) I'm not commenting on if the tendency towards ineffectiveness is due to the individuals themselves versus the organizational structures they work within and obviously not characterizing every individual, but it seems that ineffectiveness is shielded at all levels within government. Poor performing individuals are retained, poor performing departments are not dissolved and failing divisions are not sold off or dismantled. Massive layoffs are in the works in the private sector as industry leans up in this down economy, but I sure don't hear similar rumblings from the massive bureaucracy we support.
In the real world, your degrees are scarcely counted unless you're a doctor or lawyer, and your results as a collective wouldn't pass muster. (Check the averages on this MIT survey http://web.mit.edu/career/www/salary/04bycourse.html) If you still think a degree means good pay or even an available job, you haven't looked in the last decade. Current recommendations are to put education last on your resume for any job other than entry level, and accomplishments go first. Ask yourself what you would list about improved operations, increased efficiency or improved results. Could you even get a job that was in the private sector not serving the fed? Could your collegues?
As for the issue with pay disparity or cost of living increases, this is not about pay comparison. This is about the relative levels of 2001 compared to the relative levels of 2005. The government provides necessary services to the American people, and I readily admit that. The relationship is not entirely symbiotic because the health of the private sector does not track with the health of government agencies. In this way, the bureaucracy of the government can act as a parasite and negatively impact the health of the public sector. This report details one way in which the trillion dollar drain on our economy has been funneled - higher wages for government employees. What has the governement done that is so great that they should accelerate growth while the rest of us wonder if we'll have jobs in five years? I sure don't see it!
Ultimately, this report speaks to the fact that the blood-sucking tick (referring to government, not the people in government) is growing faster than the host, and that parisite/host relationship is not the symbiotic relationship we need.
From Stafford, VA, 07/03/2008
Well this piece causes me to share two thoughts. First, I certainly don't feel very "over-paid" with my B.BA, M.PA, J.D. and L.LM. I get a whopping $125,000 (which includes locality pay for the D.C. area. Heck, young people graduating from George Washington Law School start at $120,000. When you consider the "average American worker" making $40+ you have to ask how much school and experience those folks have? I know my colleagues all have at least 2-college degrees and many have more. Most Federal jobs are white collar jobs aren't they? White collar employees should be measured against civilian white collar employees and blue with blue. When someone mixes them all together their statistics are faulty. Secondly, it seems this issue of overpaid Federal workers comes along once every few years. Studies are conducted and guess what? The studies show we are always right in the middle of the pay scale.
From Alexandria, VA, 07/03/2008
It is amazing what Will Wilkinson can do with statistics. His is looking for headlines, not stating the truth. I retired in 2005 earning the “average federal civilian salary" in the Washington DC area after 43+ years of government service working all over the globe. Wilkinson’s comment does not address why I was transferred to this area, or how I got to that “average salary.” Nowhere does he discuss the $98.00 a month salary (minus taxes) at which I started my government service. He does not mention that when I graduated 40 years ago from Leland Stanford Jr. University with an engineering degree that I received a starting salary offer from industry that I did not reach in government service until more than 20 years later, and the total compensation package number of that offer was not reached until almost 30 years later. Shame on Will Wilkinson for not putting the “average” in context, or being a true seeker instead of headline seeker.
From Washington, DC, 07/02/2008
Thanks for your comments!
I was looking at "total compensation" numbers, which includes benefits (and government workers get a lot of benefits). It was a mistake, which I regret, to mention "wage" growth when I was looking at total compensation numbers, but it doesn't affect the point I was making, which is that Washington, DC has been pulling away from most of the country due to government spending. The numbers come from the Bureau of Economic Analysis via my colleague, tax and budget expert Chris Edwards. Here is a spreadsheet he compiled using the BEA numbers:
http://spreadsheets.google.com/pub?key=pCERYboRxSrd-p3JWCKONEw
You'll see that the difference in private and government compensation growth isn't a one year thing. Fed compensation growth outpaced private growth every year from 2001-2005.
These numbers include all Federal workers, inside or outside the DC area. Of course by far the largest concentration of Federal workers is in the Washington, DC area, where the government is far an away the largest employer. If federal government compensation is rising faster than compensation in the private sector, the average in the DC area will tend to rise faster than in the rest of the country.
From dallas, TX, 07/02/2008
It is clear that he is not only limiting his salary to the DC area but also including Appointed executives and senior executives. The equivilant argument would be to discribe pay a walmart by only considering Bentonville arkansas while ensuring that all payments to board and chief executives was included. Hey the average Walmart employee makes nearly $200,000, what are they complaining about?
From VA, 07/02/2008
I, too, am concerned about the validity/relevancy of the statistics quoted in this piece. Was it the average of federal workers only in the DC area (which is a high cost-of-living area)? Or was it an average of federal workers nationwide? Even if it were a nationwide average, the overwhelming majority of these workers do live in the DC area, which requires a living wage much higher than, say, in the Midwest, where friends of ours are able to pay for housing equivalent to ours at approximately 1/3 the cost.
Contract workers for the government - were they included in the figures? If not, then how do you argue that federal workers are paid too much when contractors working alongside them, doing the same jobs, are often paid twice as much? If they were included, then this skews the figures considerably.
The fact that wages rose for federal civilian employees 1.5 percent more than for workers in the private sector in 2005 is meaningless without some data on what, if any, wage disparity there existed between the 2 groups prior to that year. Were civilian employees (in the same area of the country) making more, and thus the disparate wage increases only served to bring the 2 groups' salaries closer together? That is a distinct possibility. My husband is a federal worker, and he earns far less than non-federal workers with similar job descriptions.
I'm sure that there is a lot of extra money floating around this area due to the War on Terror, and no one can doubt that some of it is wasted. But to indict all federal workers as being overpaid while producing nothing of any value is a sweeping overgeneralization that does not belong on your news program. Next time, more analysis please!
07/02/2008
median (rather than average) wage would be a more accurate and fair gauge of the issue, but I suppose it doesn't help Wilkinson's argument. Also, how is civilian worker defined? Does it include the army of contractors that have been hired to fight the war on terror? and no matter how accurate the statistics on govt. wages, it's simply wrong to compare the wages of mostly educated office workers to wages for the entire U.S. workforce which includes unskilled laborers. I also find it rich that Wilkinson sites the 10-year low in public opinion of its government. that's what happens when you put it in the hands of an administration/party/ideology that preaches small government when it comes to serving the public but practices big government when it comes to spending, tax breaks for the wealthy and fat government contracts for corporate allies.
07/02/2008
Mr. Wilkinson's statistic about the compensation for the average civilian worker sounds too high. Would you please tell me how Mr. Wilkinson arrived at it, both the data on which it was based and on the procedure he used to calculate it?
For example, is Mr. Wilkinson's estimate based on the mean salary within the Beltway? The median in the District? Does it include benefits? Is it based solely on current outlays or does it include the imputed cost of future benefits, such as medical care after retirement? All of these things would make a big difference in the final figure.
Thank you.
Peter Olsen, P.E.
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