Two new reports examine data on public employee compensation, pension costs
March 7, 2011
Across the country there has recently been extensive attention focused on issues relating to public employee compensation. Two new reports from MassBudget examine the available data on public employee compensation and state pension costs in Massachusetts. In looking at compensation the reports also consider the broader context: across the country, inequality has been increasing with wages for less-educated workers stagnating.
The first paper, Workforce Characteristics and Wages in the Public and Private Sectors, finds that wage outcomes differ across sectors by education level. Workers with at least a four-year college degree (60 percent of the public sector workforce) earn less in the public sector than in the private sector in Massachusetts -- even after accounting for benefits. For those workers without a college degree, overall compensation appears to be higher in the public sector, as the wage gap between more and less educated workers is not as great as in the private sector.
A companion report, Demystifying the State Pension System, explains how the Massachusetts public employee pension system works and what the state costs are. It finds that while public employees have good pensions, those pensions are financed primarily by contributions made by public employees to the pension fund (and by the investment earnings of the fund). The amount the state pays towards the pensions of current employees is less than the amount paid in most states -- and less than the amount paid by most private employers. This is partly because state employees are not eligible for Social Security -- which means that the state saves the 6.2 percent (of the first $106,800 of salary) that private sector employers pay towards Social Security. The amount the state pays into the pension fund for current employees is significantly less than 6 percent.
"Workforce Characteristics and Wages in the Public and Private Sectors" is available at www.massbudget.org or by clicking here.
"Demystifying the State Pension System" is available by clicking here.
See MassBudget'sBudget Browser to explore Massachusetts state budgets from Fiscal Year 2001 to the present, as well as budget proposals for the next fiscal year as they are offered by the Governor and the Legislature.
MassBudget provides independent research and analysis of state budget and tax policies, as well as economic issues, with particular attention to the effects on low- and moderate-income people.