Cato has updated its study on federal versus private sector pay. Total compensation for government workers was 1.78X what private sector counterparts earned. Adjusted for working hours, job security, and stress presumably the government option would be even better.
Young Americans should make sure to look at this before selecting a career.
[Separately, I’m wondering if the growing disparity makes government move more slowly and increases the burden of regulation. Nobody ever gets fired for saying “no” or “not yet” or “we need more time/paperwork/study.” Thus whenever there is a regulated industry and/or government approval is required, the easiest way for the government worker to preserve those 1.78X larger paychecks and pension checks is to say “no,” “we’ve never done that before,” or “please submit some more documents.” (And, actually, the pay cut from moving from public sector to private sector could be much steeper. The 55-year-old administrator getting $178,000 per year (salary, pension, etc.) who is fired after 25 years in government may not be worth anywhere near $100,000 per year in the private sector even if the skills, background, and experience are nominally comparable.)]
To provide a counter example, the following pages indicate that the maximum pay for a VA hospitalist is roughly the nationwide median pay.
https://www.federalregister.gov/articles/2014/09/18/2014-22187/annual-pay-ranges-for-physicians-and-dentists-of-the-veterans-health-administration#t-1
http://www.the-hospitalist.org/article/new-state-of-hospital-medicine-report-offers-insight-to-trends-in-hospitalist-compensation-productivity/
The point in the paragraph in parenthesis at the end is a good one. Once people get into government employment, because it becomes very remunerative, they become determined not to leave, and since contrary to popular belief there is a possibility of getting fired, they play it very safe. Playing it safe means doing what you described.
However, the point that this is a good career option for people entering the workforce is not a good one. Government agencies have done the two tier workforce thing like private companies, only more so. Being unionized may have something to do with this. Pay and benefits have been cut for new workers while being grandfathered in at high levels for workers with seniority. This effect wouldn’t be captured in industry wide averages. Government hiring has also dropped quite a bit over the last few years, and the application process is unusually lengthy for what job openings there are. And job satisfaction surveys for the federal government at least have tended to be fairly crappy.
The 1950s style office job seems to be going away, and for new entrants to the workforce it would be better that career advice reflected that.
@philg: Total compensation for government workers was 1.78X what private sector counterparts earned.
The City Manager of my southern coastal city (pop. 100K) has over 30 years of senior local government experience, an reputable MBA, and oversees 1000 employees. His annual salary is $140K, and he can expect to be terminated (for the fourth time in his career) when the City Council turns over or gets weird after about five years on the job. On the other hand, my brother, in his mid-40s, is an exec with less than 20 years of experience with one large insurance company. His annual salary is $400K and he just cashed in $1 million in stock grants.
… job security…
There may be pretty good job security in the Federal government and to a lesser extent state government, but city employment is as tenuous as the private sector and subject to the whims and dysfunctions of elected local officials, city managers and department directors.
@Ed: Government agencies have done the two tier workforce thing
This is true. In 2011, The State of Florida drastically cut back pension benefits for general employees hired after 07/01/11 – increased the vesting period from six to eight years, mandated a 3%-of-salary annual employee contribution to the plan, increased full retirement age from 62 to 65, and eliminated the annual COLA. The pension plan for Florida state workers also covers several hundred thousand county and city workers.
Smartest Woman: Your city manager chose the wrong city. See http://www.cambridgeday.com/2011/02/08/even-retired-city-manager-would-reap-extraordinary-rewards/ for how the manager of Cambridge, Massachusetts (population just over 100,000) is paid roughly $700,000 per year in total compensation (salary, pension, and other benefits). However, let’s assume that your city manager’s total comp is $240,000/year, including the value of his pension. The relevant question for a young person trying to make careers plans is not if the city manager would be better off working in the private sector for $400,000/year (your insurance executive example, which you have hand-picked). The relevant question is what would have been the most likely outcome for this person if he had gone the private sector route instead. For that we would look at the median income of an MBA. http://www.payscale.com/research/US/Degree=Master_of_Business_Administration_(MBA)/Salary#by_Years_Experience shows that an MBA with 20 years of more experience has a median salary of $118,583. As private sector workers are typically paid less than public sector workers (back to the Cato chart), the private sector median might be roughly $100,000 per year. Add in a 401k and other benefits and perhaps the median total compensation would be $130,000?
Yesterday I heard a Congressman blustering at a hearing to the effect that people at the EPA should be fired for letting VW get their diesels approved. The safest thing for the EPA now is never to approve another car again and that way their jobs will be safe.
Why advise new entrants to either government or private sector careers when they can have the best of both worlds: private contractor working on government contracts. Get 5-ish years of experience, partner up with a visible minority (they are required to be given a percentage of govt contracts), then bid on federal jobs paying 2-3x greater than even the career bureaucrats they will be working with. There are govt websites full of useless work to be done at pay rates that would make Goldman Sachs VPs jealous. Best of all, small contractors rarely do the high-paying work themselves; instead they hire cheap immigrants on temporary visas to do the work instead.
Izzie: Not approving cars would put regulators under immense and real pressure ( https://en.wikipedia.org/wiki/Keating_Five ); quite different from a Congressman blustering for the cameras.
@philg: So we have two contradictory anecdotal examples. Ho hum.
I know of federal employees who claim to be underpaid and are justified in that assertion. My perception is that highly skilled federal employees are underpaid (compared to what they could earn in the ‘private’ sector (quotes because much of the ‘private’ sector in engineering is in fact government contracting)).
Meanwhile government employees with no marketable skills are paid according to seniority (alongside skilled employees), and thus the median employee is in fact vastly overpaid.
Thus the federal government achieves the trifecta of simultaneously overpaying employees, underpaying employees, and failing to recruit and retain the people it needs.
@philg: However, let’s assume that your city manager’s total comp is $240,000/year, including the value of his pension.
The City Manager in my example (and I would say most City Managers) don’t last long enough to vest in a government pension plan. They usually are allowed to opt out of the mandatory defined benefit plan and, instead, participate in a 457b plan and/or (I think) a 401a plan.