Last week the Bureau of Labor Statistics (BLS) released its report on state and local government worker pay. It showed that public worker pay is nearly 40% higher than private sector workers. Remember this next time a call for tax increases is made.

So, what is the disparity between private sector and public sector pay comprised of? First wages and salaries. BLS data reports that government workers make 23.2% more in wages or salaries than their counterparts in the private sector. As we in Human Resources know, compensation is more than just wages and salaries. It is also comprised of benefits costs. This is where the disparity is really seen.

Benefit costs (group insurances, pensions, and fringe benefits) is 79% higher than that of private industry workers.

Let’s break this down. Total employer costs for private sector workers averaged $43.78/hr. as of March 2024. Of that $43.78/hr., $30.76/hr. was straight wages or salaries. Benefit costs for private sector employees came to $13.02 of that $43.78/hr. or 29.7% of the total cost of employer compensation.

In the public sector, workers are paid an average of $61.27 per hour. Wages or salaries comprised $37.90/hr. of that. That is 62.9% of the total hourly cost of employee compensation at $61.27/hr. That leaves government worker benefit costs at $23.37/hr. (38.1% of total hourly cost) of the total hourly wage average of total average hourly wage.

This is a huge difference in compensation costs that our state and local governments have committed to paying its workers. Remember, government worker pay is covered by our tax dollars, not how successful a business the government may be. One force that pushes government worker pay higher is the fact government budgets are set by politicians. Those politicians want the support of government workers and unions, so the politicians continually push tax dollars into the compensation of public workers. If they did not, government programs would falter and layoffs and hiring freezes would ensue in our state and local governments. This dynamic is not present in private sector employment so much because what private sector employer needs votes?

For more information about employee compensation and a breakdown of what the government compensation costs are made up of (wages, salaries, insurance and retirement), go to its website at Employer Costs for Employee Compensation Summary - 2024 Q01 Results (bls.gov)

Sources:

BLS Employer Cost for Employee Compensation Summary. 6/18/2024.

Labor Union News. BLS Data: Government Workers Make 40% More than Private-Sector Workers. (6/26/2024