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The large – and growing gap – between private and public sector benefits

Post by Kim Bradford on April 27, 2010 at 12:41 pm |
April 29, 2010 12:48 pm

Our editorial yesterday on the Pierce County payroll made reference to the recession’s effect on the standing of private sector workers relative to their public sector counterparts.

The gap shows up most prominently in the area of worker benefits. Michael Mandel, a former BusinessWeek chief economist, took a look recently at some Bureau of Labor Statistics data. His findings not only dispute the age-old idea that state and local government employees are paid less than private sector workers, they also reveal a growing gulf in health care and retirement benefits.

Somewhere in 2004, the world changed, and we didn’t realize it. Employers in the private sector put a lid on the cost of benefits (which includes healthcare, retirement, vacation, and supplemental pay of all sorts). Meanwhile the cost of benefits in state and local govt jobs just kept rising, with barely any break, both before and after the financial bust.

Mandel found that state and local governments contribute $4.45 per employee hour for health care benefits, compared to $2.01 in the private sector. The disparity was even greater in retirement benefits – $3.19 in the public sector to 92 cents in the private. Private sector retirement benefits have stagnated in the past five years, while state and local government costs for retirement rose 30 percent.

His conclusion?

This cannot continue.

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