Public Sector Wages: Freezing, Hiking, Measuring

The Obama Administration is receiving a range of reviews for its decision to freeze federal employee pay for the next two years. Is it a mark of good fiscal management, or a symbolic gesture. As expected, public unions don’t like it. Though few are praising Iowa’s departing Governor’s decision to do the exact opposite and approve a six percent wage increase for state workers.

Are public wages too high? Andrew Biggs finds while four recent studies conclude that state-local workers are no better paid than their private sector counterparts, these studies fail to account for health care benefits and pensions and thus understimate the real level of public sector compensation. When factoring these benefits in, the public sector pay premium is as high as 20 percent in California.