Rotua Lumbantobing: Contrary to report, state employees not overpaid
As contract negotiations between the Connecticut State University faculty union (CSU-AAUP) and Connecticut’s Board of Regents continue, some in our state appear to be making every effort to manipulate public opinion.
One example is a study authored by Andrew Biggs titled “Unequal Pay: Public vs. Private Sector Compensation in Connecticut” and published by the Yankee Institute for Public Policy — a self-described “free market” think-tank —in September 2015, which argues that public sector employees in the state of Connecticut are overpaid. Cutting their pay — the study claims — would result in savings of about $2 billion annually, which would help the state’s budget deficit.
What Biggs did not mention is the fact that the state of Connecticut has gotten into this predicament not by bloated state government but by having a regressive tax structure, resulting in lower tax revenues. As a 2015 report of the Institute on Taxation and Economic Policy shows, the bottom 20 percent of income groups paid 10.5 percent of their income in taxes while the top 1 percent paid only 5.3 percent of their income in taxes. Lower tax revenues led to budget cuts on many public services, including higher education, the one thing that could lead to better-pay jobs and hence higher tax revenues.
As Monique Morrissey of the Economic Policy Institute documented so meticulously in her recent report, the Yankee Institute’s study is heavily biased and deeply flawed. Conveniently, in calculating average salary, Biggs excluded the majority of public sector workers, especially teachers — exactly those who earn about 22 percent less than workers in private sector with similar qualifications — but included them to calculate the costs of benefits, knowing that they receive better benefits than those in private sector (for good reasons).
Furthermore, Biggs’s findings grossly exaggerate costs of benefits: 77-107 percent instead of 51 percent, per the Bureau of Labor Statistics. The study concludes that not only state government employees are paid 5.7 percent higher than those in private sector, their benefits are also about three-quarters to more than 100 percent higher than the benefits those in private sector get. Again, Morrissey finds this to be a gross exaggeration. Her analysis using the human capital model finds that public sector employees are being paid 14-16 percent less than those in private sector. On the other hand, public sector workers receive about 16 percent more in benefits than those in private sector, hence offsetting the wage differential for the most part.
The larger point is that the Yankee Institute report is a clear attack on public sector employees, particularly faculty in the CSU system, given the current contract negotiations.
The state has been cutting the budget of higher education, which results in students paying a larger and larger share of their college education. This is a completely wrong strategy: College education is a public good because its positive externalities (benefits) extend to society, such as better decision-making and more skilled workers with better pay, resulting in a broader tax base, which should lead to higher tax revenues in the future.
Therefore, college education should be a public investment. Instead, the state of Connecticut decides to quash the future of many young people, especially those of minority and low-income households, who are a lot more likely (than those from high-income households) to attend one of the branch campuses of the CSU system. In effect, the state is robbing itself and its residents of a better future.
Shame on those in Connecticut state government who can’t see the shortsightedness and unfairness of this approach. Connecticut residents should stand up and demand their policymakers make the right decision for the sake of future generations. If not us, who?
Rotua Lumbantobing, a Danbury resident, is an assistant professor of economics at Western Connecticut State University.