Commentary: Public Sector Pay Overshadows the Private Sector

Average annual pay for Michigan public-sector workers has grown substantially over the last decade in relation to private-sector pay. In 2001, public and private wages were comparable, with the average public-sector worker taking home about $1,400 per year less than his private-sector counterpart. However, in 2005, average public-sector pay overtook the private sector, and the gap in pay has since expanded to over $5,000 per year in favor of government workers. Over this time, wages for workers at all levels of government — local, state and federal — have grown more quickly than private-sector wages. This difference in pay does not include benefits like retirement plans and health insurance, which are also typically more generous for public-sector employees in Michigan. 

The 2009 data best shows the clear disconnect between public- and private-sector pay.  After the recession hit in 2008, average private pay actually declined by $1,000 per year, but public payrolls kept rising despite the economic downturn. Federal, state and local government average salaries all posted four-figure increases from 2008 to 2009. 

Michigan’s leaders must ensure that all state employees are compensated fairly and in a manner that the state’s taxpayers can afford. Michigan’s private sector, already weakened by the recession, is being forced to bear the burden of a large government payroll. Trimming this payroll to better match the private sector would greatly ease the pressure on Michigan’s budget. With over half a million state and local government workers employed in Michigan, even modest changes in overall compensation could save the state billions.

While these high wages for government workers may be justified, they certainly must be tightly watched to ensure that Michigan taxpayers’ money is being well spent. If Michiganders want their economy to become competitive and vibrant, they must ensure all employees — public and private — receive competitive wages.

All statistics taken from the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages, and adjusted for inflation in 2010 dollars.