Lies, damn lies and union statistics

OCT. 24, 2010

California’s public employee unions have taken the public for suckers for years, so it’s understandable they now think they can play us for fools.

A study released Monday by a think tank that specializes in pro-union advocacy purports to show that public employees receive less total compensation than their counterparts in the private sector. Unfortunately, the study is being depicted in the media as a serious analysis that debunks public hysteria about overpaid and over-pensioned public employees in cities such as Bell. But it’s nothing of the sort.

“This is the kind of paper where they started with a conclusion and tailored the research around it,” said my Pacific Research Institute colleague Jason Clemens, an economist who directs PRI’s research efforts. Basically, the researchers took the total wages in the public and private sectors, averaged it out and then adjusted for educational levels and several other factors.

The researchers didn’t look at, say, a private sector janitor with a set amount of experience and compare his total compensation package to a similarly skilled janitor in the public sector. “Instead, the study relied on education levels —- ‘the single most important earnings predictor’ —- and other factors widely found to affect compensation levels, such as gender, race, ethnicity and disability, to compare the two sectors,” reported the San Francisco Chronicle. They also adjusted for average employee age.

How anyone could report that without noting that such an approach is bogus, is beyond my comprehension.

In the public sector, people have an overall higher level of education so the researchers base their paper on the idea that they therefore should be earning more money than those in the private sector, and adjust the date to reflect that judgment. The authors of this study, “The Truth About Public Employees In California: They Are Neither Overpaid Nor Overcompensated,” produced by the Institute for Research on Labor and Employment, assume that education levels, seniority, credentialing and other factors —- inputs, in the words of economists —- matter more than outcomes, productivity and performance, according to Clemens.

In simple terms, I know someone with multiple degrees in various subjects who has few marketable skills and therefore had a low-level job in a school district. The researchers would assume that such a person should have an extremely high salary because of his credentials. I judge my reporters based on their reporting, not on the number of degrees they hold and I don’t adjust their pay based on gender, ethnicity and age issues. It’s based on how well they do their job.

That’s the basic problem, but the study is undermined by other substantial flaws. It focuses on “full-time public and private sector employees, who represent over 80 percent of the state’s labor force, and by controlling for hours worked per year.” That’s very convenient. They can then leave out low-paid agricultural workers in the private sector and small business owners, who tend to work long hours and have few benefits. Controlling for hours allows them to ignore the overtime abuse common in the public sector. They don’t appear to deal with the many pension-spiking schemes that government employees have mastered, but which are not available in the real world.

James Sherk, a labor economist at the Heritage Foundation, notes that the study doesn’t include federal employees in the survey and federal workers are paid far more than others. He also noted that “This study only looks at part of the benefits paid to state and local employees. It ignores the retiree pension and health-care benefits they get but which the government has not set aside enough money to cover. If the study included the more than $500 billion in unfunded government pension costs in California then state and local employees would not appear remotely under-compensated.”

How can an empirical study not look at the full value of a benefit that often is worth millions of dollars to individual employees?

The researchers failed to include the value of retiree health benefits, according to an analysis by CPA Marcia Fritz, president of the California Foundation for Fiscal Responsibility. The study, she notes, doesn’t adjust for the reality that teachers do not work a full year. It doesn’t adjust incomes even though private employees have money deducted for Social Security and most public employees do not have such deductions. She argues that had the researchers accounted for the true cost of retiree benefits that it would boost public sector wages by 15 percent. These are unconscionable flaws in research, although we shouldn’t think of the study as research.

It is a political screed. The introduction complains that “government workers have been vilified.” Throughout the report, it makes its point: “Thousands of California public employees have lost their jobs and many more have foregone pay through forced furloughs and their families have experienced considerable pain and disruption. … They were simply casualties among a list of hard working innocent victims of a financial system run amuck.”

The political overtones should not be a surprise. This is, after all, one of the two University of California labor centers whose funding had been slashed by the Schwarzenegger administration, then partially restored by UC after intense pressure from legislative Democrats. Recent studies tilt hard to the left, such as “Voices for Justice: Asian Pacific American Organizers and the New Labor Movement.”

How many of you in the private sector get guaranteed pension benefits at all, let alone promises of 80 percent to 90 percent of your final year’s pay, cost of living adjusted for the life of you and your spouse, available in your early 50s? Yet these are common in the public sector. How many of you get health benefits at the level offered in the public sector? Check out the salaries up and down the government pay scales and it’s a real eye opener. Look at California’s fiscal mess and at its pension debt, estimated as high as half a trillion bucks.

All the taxpayer-funded union spin —- even if it’s gussied up in a study produced at Berkeley —- can’t undermine the truth.

–Steven Greenhut

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  1. Arthur Ramirez
    Arthur Ramirez 25 October, 2010, 08:13

    Pension reform needs to come from a state wide Proposition, the state legislataturs do not have the political will to attack such a political albatross, they just want to get re-elected. Hopefully there are groups that can put this on a statewide Proposition, and we the people can vote. Why we guarantee pensions,when the people who get them don’t fully fund them, I don’t understand. We the People should not have to make up the differance for Pensions or Health Benefits. Let’s take care of this problem, before we have to stop funding more programs that help the ALL the people of California.

    Reply this comment
  2. JonathanE
    JonathanE 26 October, 2010, 12:54

    “This is the kind of paper where they started with a conclusion and tailored the research around it,” said my Pacific Research Institute colleague Jason Clemens, an economist who directs PRI’s research efforts. Basically, the researchers took the total wages in the public and private sectors, averaged it out and then adjusted for educational levels and several other factors.

    How do we know the PRI doesn’t do the same thing?

    Reply this comment
  3. Halfway To Concord
    Halfway To Concord 26 October, 2010, 16:31

    This report came out earlier this year. My criticism at the time

    http://www.halfwaytoconcord.com/bogus-study-claims-public-sector-underpaid/

    This report basically is saying that

    because private sector jobs may not require college education but pay the same as public sector jobs that require a degree, the study concludes that the qualifications of the public sector employee is of more value, yet not properly accounted for in compensation vis a vis private sector cohorts without some academic credential.

    Ergo: Government workers are over qualified and therefore underpaid!

    To hold up some theoretical uncompensated skill or qualification is bogus. To ignore the current national crisis of unfunded public employee retirement and benefits and impact on budgets and services is simply breathtaking.

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  4. CalWatchdog
    CalWatchdog 26 October, 2010, 19:23

    Check out PRI’s peer-reviewed research and test it, JonathanE. Check out this union study and you’ll see that it fails even the most basic standards of good research.

    Reply this comment
  5. JonathanE
    JonathanE 26 October, 2010, 23:13

    @CalWatchdog,

    So you’re saying the academics who wrote study were flawed in the most basic standards of good research?

    Based on what? You’re long on rhetoric, short on substance. Something that has become a conservative tactic.

    Who were the peers that reviewed the PRI study? Why are they more credible than those who reviewed the UCB study?

    Reply this comment
  6. JonathanE
    JonathanE 26 October, 2010, 23:28

    Hey Steve,

    Read the PRI study. Seems to me that is one that is flawed. The Berkeley study makes perfect sense. I went and read the study in question at the website of the Institute for Research on Labor and Employment. Having done so, I find that you are full of beans on almost every point you make: 1) It is not true that the study did not “look at” a job such as janitor, as you allege. Jobs at the educational level of janitor do earn more than their private sector counterparts, but the story is different at every other educational level; 2) it is not true that teachers’ work year is not taken into account. Comparisons are made of annual and hourly compensation; 3) the fact that some public employees do not have deductions made for Social Security is (obviously) countered by the fact that they also do not get Social Security; and 5) it is not true that public employee retiree health is not taken into account. It is, under the catergory of retiree benefits.

    I might add that employee stock options are not considered; doing so would tilt the results of the study farther in favor of the study’s conclusion.

    I’m amazed that someone who claims such intellectual superiority would miss these obvious points.

    Reply this comment
  7. Roger White
    Roger White 27 November, 2010, 00:23

    Hey Steve,

    JonathanE is right on! Your reference to CPA president Marcia Fritz is an example of a glaring misperception regarding teacher salaries. First, she does not recognize that employees pay into the system out of their own salaries at a prescribed rate by the State to be matched by the participating District, that the teacher is paid for 181 days of service with no overtime pay for services required by many districts, that I, myself, had Social Security contributions withheld in addition to my STRS contributions and for which the Federal Government denies me most all social security benefits due me because the Federal government says that even though I had to continue paying into SSI but did not not qualify because I belong to the other system (ie the Teacher’s Retirement.) I am sure the Federal government enjoys my “free contributions”. I am scraping by on my meager monthly sum at age 68, without the medical records that are still screwed up by the Vet’s Admin. Stick that in your pipe and smoke it when you’re 68!
    Some great service your type of-winner-take-all ideology provides. Those of us who served in combat in Vietnam and later went into teaching, and who have had to battle for our vet’s benefits must now do battle with your misinformation. I would just love to hear in person all about how life must be so hard for you.
    I’d like to meet you and Jason at the Pacific Institute someday to see go over your raw data and also any Heritage Institute person as well.

    Reply this comment
  8. sydney
    sydney 1 March, 2011, 12:05

    If understanding why education statistics is beyond your comprehension, you´re not trying very hard. Your janitor comparison is misleading. Teachers, like many private sector workers, are hired with a baseline education requirement–B.A. or B.S. or B.F.A., etc., in addition to state accreditation. Their performance, years of experience and additional qualifications are evaluated only on top of those requirements. Jobs in skilled and unskilled labor are linked more closely to years of experience and performance, as there is a much lower or no baseline educational requirement for these jobs. Thus, comparison date must be adjusted for education levels. The study does this.

    Further, your one-person data set, involving one person you know with “lots of education but few marketable skills” who works at a school is both misleading and contains political overtones- both accusations you make against the study. Those of us in education have skills that make us experts in education. Your suggestion that professional educators end up there because they can´t do anything else is insulting and false. Please, dismantle the public education system in California. Privatize education, and make teachers´ salaries linked to the median private sector worker´s–that´s whom they´re duping! Equalize the system! Fire the ones who don´t measure up- they can be replaced by the thousands of experts with “marketable skills” like yourself, right? How about a goal of 80% turnover each year? That´s a lot of pressure to make sure teachers are doing a good job! Take away their benefits, force them to be at school to document every hour worked, and any remove any protections against political whims that govern their contracts and curriculum. Then say hello to your new colleagues in what used to be called the Third World.

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