As a resident scholar at the conservative American Enterprise Institute, Andrew Biggs studies one of the most contentious issues: the pay differential between public-sector and private-sector employees.
In an interview with Roll Call, he argues that an across-the-board pay freeze simply isn’t enough to close the gap between the two groups and says demand is much greater on the public side than the private.
Q: Why do public-sector employees have greater job security than private-sector employees?
A: There’s a variety of different reasons for it. One is that ... because the government is not as cyclical as other businesses, there may be less need to hire or lay off. I tend to think the bigger factor is the power of public employees.
Q: Is there anything the private sector can do in both the short term and long term to compete with the public sector in the areas of wages, benefits and job security?
A: Well, it’s very, very hard. The private sector competes best on wages because wages are the place where compensation in the public sector is most comparable to the private sector. It’s in the area of benefits and job security where things are really very, very different. Pensions are much more generous in the public sector, in part because they have accounting standards that are a lot looser than private-sector firms have to work with. The solution to that is ... to make public-sector plans use accounting standards that make sense. In terms of job security, I don’t think that’s something where the private sector should try to compete with the public sector.
Q: In your study last year, “Comparing Federal and Private Sector Compensation,” you noted that the federal premium shrinks considerably for higher-level employees in the public sector. Why?
A: Most studies find ... that pay is most generous at the lower levels of skill and less generous at the high levels. Politically speaking, there’s a limit on how low the wages can be in the public sector because it just sort of looks bad. And likewise, there’s a limit on how high the wages can be because that also looks bad. This comes down to what the typical voter is going to approve of.
Q: Could you explain the Pay Agent Approach? And why, if at all, you’re critical of using it as a metric to compare the pay between the two sectors?