Are Wisconsin Public Sector Workers Underpaid?, ctd.
Ezra Klein has responded to my post in which I argued that the EPI study that claimed to show that Wisconsin public sector workers were underpaid is unpersuasive. His response begins with this:
Jim Manzi has posted a critique of the Economic Policy Institute’s study (PDF) suggesting that Wisconsin’s public-sector workers are underpaid relative to their private-sector counterparts. It basically boils down to the argument that this sort of thing is hard to measure. The study controls for most every observable worker characteristic that we can imagine controlling for.
But my basic criticism was that it fails to control for lots of plausible, common-sense differences. That is, that the study doesn’t control for all the characteristics we can imagine, but rather, some of those for which we happen to have data.
Klein is correct to say that my post “basically boils down to the argument that this sort of thing is hard to measure.” But he then argues that the purpose of the original study was not to demonstrate that public sector workers are underpaid, but rather to rebut the claim that they are overpaid:
[T]he EPI study is aimed at a very specific and very influential claim: that Wisconsin’s state and local employees are clearly overpaid. It blows that claim up.
That may have been the author’s motivation, but here is the final conclusion of the executive summary of the report:
[P]ublic sector workers in Wisconsin earn less in annual or hourly compensation than they would earn in the private sector.
The report makes a positive claim that it has determined a compensation “penalty” for working in the public sector, and repeats it many times. My argument was that this report does not establish whether or not this claim is true.
By the same logic, it also fails to “blow up” the claim that Wisconsin’s public workers are overpaid. The methodology is inadequate to the task of establishing whether these workers are overpaid, underpaid, or paid perfectly. As the last paragraph of my post put it:
I don’t know if Wisconsin’s public employees are underpaid, overpaid, or paid just right. But this study sure doesn’t answer the question.
Statistician and political scientist Andrew Gelman has a very interesting response to my post, in which he agrees that this conclusion “sounds about right,” but cautions that the study is not “completely useless either” because this kind of adjusted comparison is better than simply comparing raw averages between public and private sector workers. I agree with that entirely. But that is, of course, a very different thing than saying that these adjustments create sufficient precision to support the bald statement, made in the report, that the author has analytically established that there is a “penalty” for working in the public sector.
(Cross-posted at The Corner)
It’s very hard to put a price on the value of a pleasant work environment. A good boss, pleasant co-workers, good commute, flexibility in hours if you have to go pick up your kids – these make a HUGE difference in deciding between two jobs, or deciding whether to stay or go.
If public employees stay at their jobs, there are only a few explanations I can think of.
1) Asymmetrical information: When they were hired, public employees didn’t realize the value of other options. Because so much of their pay is back loaded, in retirement benefits etc., public employees are “locked in” after a certain point.
2) Altruism: working as a bookkeeper or janitor for the department of motor vehicles is no more pleasant or rewarding than working as a bookkeeper or janitor for Filene’s, but DMV workers do it because they are strong believers that DMV bookkeeping and janitoring is work that needs to be done, even at personal cost to themselves.
3) Rational choice: Bookkeepers and janitors at the DMV stay there because they think it’s the best option available to them and their families. They’re not sure that they could get or keep similar work in the private sector, or they think they would like it less well. Job security, benefits, and relatively less pressure make that job a preferred choice for them, even though they tell themselves that they should also be paid more.
My anecdotal recollection is that government jobs are in high demand, primarily because of job security. I suppose you could take data, though — what’s the voluntary departure rate after someone is hired at various points,* and how many applications does the government receive relative to similar private sector opportunities.
[*] After several years, lock in due to deferred compensation would be a confounding factor, but the first few years should be informative.
— J Mann · Feb 23, 04:34 PM · #
From another one of your articles: “And a massive carbon tax or a cap-and-trade rationing system would likely cost more than the damages it would prevent. Either would be an impractical, panicky reaction that would be both more expensive and less effective than targeted technology development in the event that we ever have to confront the actual danger: the very small but real chance of much worse than expected damages from greenhouse gases.”
So, you can make this claim based on 100-year projections of the global economy, estimations about the progress of technology that can mitigate damage to the climate, etc, but it’s inappropriate to make a much more narrow claim characterizing the current situation regarding public/private compensation in Wisconsin based upon thousands of interviews conducted within the past few months or years? Did you control for every reasonable variable in crafting the absolute statement that’s in bold?
— Zach · Feb 23, 05:14 PM · #
Zach, you make a good point. I think Jim Manzi’s reply is that in unpredictable situations you go with traditional time tested responses. In other words, you fall back on your ideology. He is a conservative. A liberal falling back on his ideology, wants to take action to ameliorate. I personally think the really conservative thing to do would be to recoil at human’s changing something as vast, unpredictable, complicated, and potentially harmful as the earth’s climate, and try to stop.
J MAnn,
One reason Gov jobs are stable becasue Gov. is generally stable and Gov. mostly provides services that are always needed. There are always roads to patch, kids to teach, moneys to account, criminals to prosecute, etc.
Unions also make it harder to fire people, which makes jobs stable too. I know plenty of people here in madison who work in civil service and they all have stories about people who are useless. But then my wife works for a company where the hands-on owner is mostly useless and this definitely affects the quality of the product, which drives my wife crazy. In fact she’s worked for two places I can think of like that. I have too. I used to work for Boeing and that place was insane with power struggles, incompetence, slacking, etc. I worked at Starbucks world headquarters and witnessed Howard Schultz descend from his penthouse office to publicly humiliate a peon on her first assignment And we all know how well he managed the Seattle Supersonics. The main reason they play in Oklahoma is becasue he fucked everything up. And then think about how many business are really successful. How about Chrysler? And as for small businesses, I live near what I call the street of shattered dreams. Over and over I watch small businesses rent storefronts for ridiculous business ventures and then watch them fail. It’s painful.
My point is that human enterprise is fraught with incompetence. It’s only becasue the possibility of improving civil service is theoretically within our powers that we focus on it.
Having said that, I think union rules and civil service regulations could definitely be tweaked to improve the ease of hiring and firing.
— cw · Feb 23, 05:49 PM · #
I personally think the really conservative thing to do would be to …
I love it when people hide behind the dictionary definitions of words like “liberal” and “conservative”
I think union rules and civil service regulations could definitely be tweaked to improve the ease of hiring and firing.
That would likely the at the cost of making the system more corrupt, e.g. making it easier to fire people because they don’t conform to the ideology and behavior of the ruling class. When it comes to government work, you can hardly ever make the system more efficient without making it more corrupt. And you can’t make it less corrupt without making it less efficient. On the other hand, you can have BOTH corruption AND inefficiency. But you can’t have neither.
— The Reticulator · Feb 23, 06:10 PM · #
@cw On your examples of incompetence in the private sector, you should really check out Donald Rumsfeld’s collected memoranda that were just released. Here’s a guy who was a celebrated CEO and the memos show a complete inability to communicate information in any reasonable way (ie, asking Doug Feith to come up with a solution to “Korea doesn’t seem to be going well”)
— Zach · Feb 23, 06:23 PM · #
Jim:
This discussion is a perfect example of what is so frustrating about arguing issues using statistical studies. I know you have a PHd. The guy who did the original study probably has a PHd. Ezra Klein better have a PHd if he is at all worthy of the esteem that the left gives him. So all you guys have Phd’s. The commenters here all write as if they deserve a PHd. Yet all you smart guys cannot even agree on what the study says.
I happen to think that you are right about things 99% of the time. I agree with you whenever I understand what the hell you’re writing about. I have little doubt that you’re right about this issue.
But what hope is there in convincing anyone of anything when the “smart guys” cannot even agree on what the study says?
— jd · Feb 23, 07:04 PM · #
Retic.
I didn’t know that I couldn’t use the dictionary definitions of words.
About the coruption, you may be right. In the past, gov. jobs were all about patronage.
Zach,
I saw that. I honestly thought it was from the Onion at first. Doesn’t it also confirm the popular impression of the Bush Admin? Which shows we don’t always need double blind studies to know what is goign on.
— cw · Feb 23, 07:49 PM · #
I think the study — especially as fleshed out by the extensive blog discussion of (the extent of) its import — does demonstrate pretty decisively that there’s not very much difference between private and public compensation in Wisconsin.
That’s not a bad basis of fact to start with in formulating policy.
— Steve Roth · Feb 24, 03:24 AM · #
cw: I didn’t know that I couldn’t use the dictionary definitions of words.
That’s not what I said when I referred to hiding behind the dictionary. I’m referring to people who ask me what’s so bad about liberals, and then quote from the dictionary definition, which describes everything that political liberals are not. This has happened to me more than once. Or when you talk about leftwing bias in the movie industry they’ll feign objection, saying movie producers are some of the most conservative people out there. Not that any of them are conservative in the sense that they ever voted for Reagan, of course. Or the way the news media would describe hardline Communists in post-Stalin Russia as “conservative,” which they are in a sense, but not in any sense that matches the way the term is used in American political discourse. That sort of behavior is what I call hiding behind the dictionary.
— The Reticulator · Feb 24, 06:00 AM · #
I do like the way you have presented this problem plus it really does present me a lot of fodder for thought. Nonetheless, from just what I have witnessed, I just hope as the actual feedback pack on that folks stay on point and not start on a tirade involving the news du jour. Still, thank you for this exceptional point and while I can not necessarily go along with the idea in totality, I regard your point of view.
— USA Hot News · Feb 24, 08:10 PM · #
I don’t think it matters if they are underpaid or overpaid, the sticky point is that their current and past income, along with their retirement income and current and future retirement health insurance benefits come from tax paying citizens. I don’t care if it’s a teacher, cop, firefighter or a cubicle worker watching soap opera’s all day long. Part of my income goes to “state workers.”
— conner · Feb 24, 11:01 PM · #
‘Part of my income goes to “state workers.”’
And that’s bad? You want someone to clean your sewage for free?
— cw · Feb 25, 01:06 AM · #
Dear Conner,
Please help. I’m a senior attempting to navigate my options and choose the tax-payer funded medicare plan that’s right for me. (Thankfully, it’s citizens like me who pay parts of their incomes to support government health care programs that in turn support “parasites” like you who take a nice cut helping the addled and/or overwhelmed elderly buy insurance.)
— Agnes P. · Feb 25, 02:41 AM · #
cw: And that’s bad? You want someone to clean your sewage for free?
I would like that. But I have to pay about $100 for the guys with the septic pump truck to come and do it. There’s an extra charge if they have to dig around to find the opening. I also had to pay a fee to the county health department to get my septic tank and drainfield approved when we needed a new one, to say nothing of what it cost to have a contractor put it in. There were no travel vacations for us that year. I don’t begrudge that. It’s important to protect our groundwater. But if I could get the government to pay for for the pumping fee, that would give me $100 that I could contribute to the election campaigns of people who would defeat those who voted me the money. That would be cool.
— The Reticulator · Feb 25, 05:31 AM · #
Note that Klein said the study blows up the claim that Wisconsin’s state and local employees are clearly overpaid.
And that would seem to be true—the evidence that was previously used to show that they were overpaid has been shown to be incomplete.
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