Sidetracking the Gravy Train; Government Can No Longer Afford Gold-Plated Employee Benefits

Article excerpt


If you are an elected official, and you have to make a choice between raising taxes on your constituents or cutting the number of government employees and their salaries, what would you do? For most of the last few decades, in most places, the politicians would just raise taxes. Now that is changing, and here is why.

In recent weeks, what used to be a rare event is becoming commonplace, and that is public employees losing their jobs or having their wages and benefits cut. Government employees are rioting in Greece (as if that does any good when the cupboard is bare) because many of them are losing their jobs. Greece, Spain, Portugal and even the Cayman Islands have announced they will be cutting public-employee wages and benefits. Many state and local governments in the United States are doing the same thing.

Most public employees have been pampered, rarely getting fired, with wage and benefit packages steadily rising, so now many are paid far more than their private sector equivalents. A recent study, using data from the Bureau of Labor Statistics, showed that average U.S. federal salaries exceed average private-sector pay in 83 percent of comparable occupations. In addition, according to the Bureau of Economic Analysis, the value of health, pension and other benefits averaged $40,785 per federal employee in 2008 vs. $9,882 per private-sector employee. A recent study done by Chris Edwards, director of tax policy studies at the Cato Institute, showed that pay in state and local governments averaged $39.66 per hour in 2009, which was 45 percent higher than the private sector average. The public sector advantage was 34 percent in wages and 70 percent in benefits.

The overstaffing and sloppy work performance in the public sector is the subject of countless jokes, which would not be funny if they did not contain a strong element of truth. Even civil servants joke about the 80-20 rule - where 20 percent of the employees do 80 percent of the work and vice versa. The late-night comedians can always get a laugh when describing the indifferent attitude of department of motor vehicle employees. Professors in many public colleges now only teach one or two classes per semester. When I was a young professor, we taught three or four courses (which was not particularly taxing). No wonder college tuitions have been rising far faster than inflation. The private-sector has been surging in productivity growth while much of the public sector has negative productivity growth.

As most of the world's governments head toward a Greek-style meltdown, taxpayers increasingly realize that if government spending is growing faster than the economy, there is no way that tax increases can solve the problem - and most countries have about reached the limit of how much more tax revenue they are going to be able to coerce and extort from their citizens. …