Employee compensation — which is higher, public or private?

State and local government employees — on average — receive materially higher total compensation than private sector employees.    Of course, public employees include many highly skilled categories of workers.

There are three major components of compensation:  Current wages and salaries, pension plans, health care and other benefits.  Available data suggest that state and local government employees, on average, have equal or higher wages than private sector employees, generally better pension plans, and generally better health care benefits.  They also have access to post-retirement health care benefits that are rare in the private sector.

This pattern of difference is consistent with the general success of unions in both public and private sectors in obtaining higher compensation for their members.  Nationwide, union representation is much greater in the public sector (40%) than in the private sector (15%), primarily as a result of high unionization in teaching and public safety. 

Of course, the mix of jobs in the public sector is very different from the mix of jobs in the private sector.  Public employees — police officers, teachers, firefighters — are relatively high-skilled professionals.  And some public sector employees may not be doing as well as others.  Apples-to-apples comparisons for individual occupations are difficult.  However, three major national data sources confirm a fairly clear pattern of difference between public and private sector compensation.  

The Bureau of Labor Statistics’ National Compensation Survey generates a total compensation comparison.  This comparison has been analyzed and elaborated by the Employee Benefits Research Institute.  This comparison puts state and local government total compensation per hour worked at 51% above private sector compensation, with the wages 43% higher and the benefit costs 73% higher.   

Another survey done by the BLS, the Occupational Employement Statistics program, uses a different methodology than theNational Compensation Survey, but it makes similar findings.  It only measures wages, not benefits, but provides state level results for individual occupations.

Data belwow from the National Income and Product Accounts also suggest that total annual compensation for state and local government employees is about 11% above private sector employees.  The contrast in this bulk annual comparison is smaller than the contrast in the hourly BLS comparisons for individual occupations.  This may be because teachers work fewer formal hours per year than most full-time employees.  Additionally, the private sector side of the NIPA comparison may be inflated by the few earners at the highest private sector levels.

The pages in this section explore public employee compensation in Massachusetts in more depth.