Do Queues for Public Sector Jobs Tell Us Anything?
The question of whether public sector workers are overpaid or underpaid compared to what they would earn in the private sector is a hot topic these days. A fair bit of academic research shows that people generally earn less money in the public sector (particularly in state and local governments) than people with the same qualifications doing the same type of job in the private sector.
Some people who disbelieve this evidence are now suggesting a different approach to illustrate that workers in the public sector are overpaid: looking at queues for job openings. For example, Andrew Biggs (from the AEI) argues that “state and local government jobs offer workers higher total compensation than those individuals could get in the private sector. As a result, people are lining up to get them.”
But taking the existence of queues for public sector jobs as evidence that those jobs are overpaid is problematic, for a couple of reasons.
1. Nearly all jobs – public and private sectors – have “queues”, if you define that as a situation in which there are more applicants than open positions. What matters is whether the queues for public sector jobs are longer than the queues for private sector jobs for the same occupation and qualifications, and I have yet to see compelling evidence that that is the case. (I would welcome help in identifying some; the most commonly cited papers, e.g. Krueger (1988), do not seem to contain such direct evidence.)
2. If racial or sexual discrimination exists in the private sector but not in the public sector (and there’s evidence that this is the case), then women and racial minorities would tend to be underpaid for their labor in the private sector, giving them a strong incentive to try to switch into the public sector whenever possible. This would explain excess queuing for public sector jobs (if such excess queuing does indeed happen).
3. If, as the evidence suggests, public sector jobs tend to have compressed pay schedules, with relatively good compensation for entry-level jobs but only modest increases in compensation over an entire career (leaving overall lifetime compensation lower), then that means that individuals who can not afford to wait for the higher pay that they would eventually get in the private sector would tend to prefer public sector jobs. For those people, the requirement for a higher salary early in their career would make them willing to accept the lower lifetime earnings they’ll get in the public sector. This would also tend to cause excess queuing for public sector jobs, even though compensation is lower than private sector jobs. (Yes, this will only happen if there are incomplete credit markets such that those people can’t borrow sufficiently to make up the difference in the early part of their careers, but the fact that credit markets are indeed imperfect has been well-established, particularly for certain segments of society.)
So put me in the camp of those who are not persuaded by the “queuing” methodology of trying to determine if public sector jobs pay better or worse than their private sector counterparts.
Or it could just mean that people prefer security to higher pay.
Andrew Biggs gets paid to lead people to false conclusions.
Kash,
I agree with coberly. My entire experience with private to public has been about one thing; security. The ability to go to work and know your not going to fired sans gross incompetance is very important. I know of people who basically traded 10-15% of their pay for that security. My first hire was to replace a guy who did this. Also, with this security is the knowledge you won’t move (physically) unless you want to. Thus you get guy in the Fed that have been at the same desk for 20-30-40 years. And yes I knew a guy who had been at the same desk for 35 years. I was there at his retirement party at age 77!!!!
And the only way to get fired is gross incompetance. You can plug along forever at average no matter how good the guy below you is. Very frustrating for the young guys BTW – why I didn’t go that route.
Islam will change
buff
well, it isn’t always that way. by the time i got a state job i needed the security, but i didn’t get it automatically. got fired twice… not for incompetence, but for explaining the law to my bosses.
plugging at average is good enough for most jobs. and if you really have something special to offer,the system can find a way to promote you, so don’t take your experience as “the norm.”
what’s nice is to have a mixed economy where those who want/need security can work at the jobs that really don’t have much to do with “competition.” and those who want to take a few chances to climb in the world can work for a private business or start their own.
if you think about it, the mix works out for the best for all of us, not just the respective job holders.
by the way, how was your security in the air force?
actually, there is another possibility.
imagine there are two companies in town, one private and one public. due to a downturn in the economy there are 100 people who are looking for work. they each apply at both companies.
since the turnover at the private company is greater than that at the public company (that security thing), the queue at the private company is going to be shorter than the queue and the public company. there are a couple of mechanisms for this that i will leave as an exercise for the reader.
btw
to save biggs the bother: he would argue that since the public job is preferred, the pay offered should fall until the desirability of the jobs, security vs pay, are equal. this is the sort of thing an economist would think. one with no experience as a human being. it’s called “what the traffic will bear.”
most people are pretty angry when it’s applied to them.
Security in the Air Force sucked. Only 65% of my age group made Major – one of the most brutal promotion cycles ever – right after the RIF and while they were still ‘shaping’ the leaner force after the victory in the Cold War. Of those that survived that cut only 40% made Lt Col. Thus only 1 in 4 Captain, who elected to stay in the Air Force, made Lt Col. For my academy class it less than 1 in 10 made Lt Col (this includes voluntary seperation, involuntary seperation, death, and medical seperations too thouugh – not a apples to apples comparison). I left before my age group hit the Col in-the-zone board at 22 years in service (vs. 20 years that is standard). But I understand the promotion rate to Col was only 33% of that gruop – during a war!
So security in the AF basically did not exist. Remember its a up or out system. The AF kept a few Majors who didn’t make Lt Col, mostly pilots and special forces types, but almost all were seperated.
As for explaining your boss the law. As one old Col told me, if your going overthrow the King, make sure you truely kill him. A wounded one is far more dangerous…
Islam will change
Buff
your Col was right. but I was pretty dumb about that at the time. I had no interest in overthrowing the king…. who i thought was just someone else getting a paycheck from the people… i just wanted the boss to know we weren’t following the law as written in our own policy manual.
bosses are touchy about that. i think the first one was just annoyed at my “criticizing” above my station. the second was afraid i was going to blow the whistle… which actually had not occured to me, but by the time it was all over i could see how the world really works.
i have a friend who works for an international private corporation. he tells the same stories i do.
as for the security at the AF. twenty years and a pension would look pretty good to a lot of folks.
probably most of those people wouldn’t care about the getting shot at part, but this old berserker wouldn’t have minded that so much as the “yes, sir,” parts,
How can you measure queues for private industry — at least white collar jobs requiring comparable education to most public jobs — when so many are filled by word of mouth? The public jobs — whether a sham process around someone already chosen or not — always need to be given public notice, and the number of applicants a matter of public record. How can there be reliable statistics on private queues?
I wonder how you even measure queue’s in the public sector in a meaningfull way. I once participated in hiring a replacement for myself at a public university and we had something like a dozen applicants who were not remotely qualified in the process.
Maybe, for whatever reason, grossly unqualified people are more likely to apply for government jobs? Could have to do with the ease with which one could apply for many many jobs at once (government hiring lists typically being quite long).
Oh, and to urban ledgend’s point I have participated in many private hiring processes and I have never seen an applicant so grossly unqualified, but that might be because HR is good at filtering them out before they get to me.
coberly,
Reread what I posted. Only 1 in 10 of my classmates made it to cliff vest at 20. That’s 10%. If you got out after 10 years you only got your saved vacation days and a plane trip to your home of record. If that’s your idea of security, then I’m not sure what we are talking about.
And none of my personel brushes with death had anything to do with someone shooting at me. BUt I would still have been just as dead.
Islam will change