In Maine, government employees receive substantially more compensation than private-sector workers, according to a new study published by The Maine Heritage Policy Center.
“The Government Gravy Train: An Analysis of Private versus Public Sector Compensation,” released April 17, was written by J. Scott Moody, the organization’s vice president of policy and chief economist, and Jason A. Fortin, its director of communications.
Using data published by the Bureau of Economic Analysis of the U.S. Department of Commerce, Moody and Fortin compared compensation levels in Maine between calendar year 1969 and 2005 for private-sector employees and both state and local government employees (the “public sector”).
Employment compensation has two components. The first part is the wage or salary paid to the employee for services rendered. The second part is benefits–commonly health insurance, retirement, etc.–which are paid in addition to a wage or salary.
Private vs. Public
“This report reveals that in Maine it pays to work for the government,” said Fortin. “Government employees earn equal salaries and wages [when compared with their private-sector counterparts], but receive substantially richer benefits.”
The analysis revealed that in 2005, public-sector employees on average received 12.6 percent higher overall compensation than private-sector employees–$43,487 versus $38,617.
“The large disparity in compensation levels is disturbing on several levels,” added Moody, “but none more than the fact that these relatively well-paid government positions are funded by private-sector employees who are paid much less.”
The report also revealed compensation varies significantly between state government workers and local government workers. The average state position was compensated at $51,003 per year, while the average local position was paid $40,268. In both cases, compensation exceeded the private sector.
Impact of Benefits
“Clearly, the rich benefits being paid to government employees are driving the enormous gap,” said Fortin. “Government employees receive benefits packages that are nearly two times more than someone working for a private company.”
In 2005 in Maine, the report notes, public-sector wages and salaries were 1.2 percent lower than the private sector, or $31,428 versus $31,812. But the average benefits package in Maine for the public sector was 77.2 percent higher than in the private sector–$12,059 versus $6,805. That ratio was the fourth highest in the nation.
Tax Implications
The report calculated the potential tax implications if in 2005 the ratio of private- to public-sector compensation had been reduced to the national average. Such a reduction would have shrunk the compensation gap to 1 percent from 12.6 percent. The potential tax savings would have been up to $392.2 million.
“If Maine policymakers are serious about lowering taxes, they must look at bloated benefits packages and higher salaries paid to government employees,” said Moody. “Simply reducing government compensation to the U.S. average would save taxpayers hundreds of millions of dollars. And even at the U.S. average, these employees would be earning more than private-sector employees.”
Lawmaker, Taxpayer React
When presented the findings of the report, state Rep. Richard Cebra (R-Naples) was surprised by the size of the benefits difference between the public and private sectors.
“It is common at the State House to hear of anecdotal evidence that the compensation gap exists, but to see the difference quantified is quite telling,” Cebra said. “This new evidence will definitely lead to a more honest budget debate about government pay levels and the high tax burden in Maine.”
Mary Adams, a long-time citizen activist and leader of a citizens’ initiative referendum last year that would have enacted a Taxpayer Bill of Rights tax and expenditure limitation, was not as surprised about the report’s results.
“The findings in the report are expected,” said Adams. “Maine has one of the nation’s most oppressive tax burdens, a burden that is driven by excessive spending. Government employee benefits are clearly one of the drivers of Maine’s high tax burden.
“There is no question that the state employee union’s ardent opposition of the Taxpayer Bill of Rights referendum can be attributed to the desire to protect their rich benefits,” Adams said.
Steve Stanek ([email protected]) is a research fellow at The Heartland Institute and managing editor of Budget & Tax News.
For more information …
J. Scott Moody and Jason A. Fortin, “The Government Gravy Train: An Analysis of Private versus Public Sector Compensation,” published by The Maine Heritage Policy Center, is available through PolicyBot™, The Heartland Institute’s free online research database. Point your Web browser to http://www.policybot.org and search for document #21260.
