LaborPains.org

The Economic Policy Institute: STILL Wrong on Public Employee Compensation

—Center for Union Facts—

Despite statements by labor unions and their supporters that a sizable compensation premium is a benefit of union membership, the Economic Policy Institute (EcPI)—with the assistance of associate professor Jeffrey Keefe of Rutgers University—has gone to great lengths to argue that this compensation premium doesn’t hold in the public sector. Specifically, EcPI and Keefe argue that public sector workers suffer approximately a four-percent compensation penalty when compared to similar workers in the private sector.[i]

Criticism of Keefe’s original study demonstrated that claims of a compensation penalty were off the mark. An analysis from the Center for Union Facts that includes all relevant employees and properly accounts for the size of their employer demonstrates that public employees receive a compensation premium of at least 5 percent over their private sector counterparts. Others suggest that properly accounting for the value of public sector job security, retiree health benefits, and pension funding could create an even larger premium—as high as 30 percent.[ii]

In a recent Issue Brief, Keefe doubled down on his assertion that public employee union leaders are ineffective at doing their job—specifically, that there is no public employee pay premium.[iii] Keefe dismissed our criticisms of his original study as “desperate,” “unsound,” “inappropriate,” “unreliable,” and “incorrect.”  Strong words—but unfortunately for Keefe, they’re not backed up by equally strong facts.

MISSING EMPLOYEES

The Center for Union Facts (CUF) criticized Keefe’s original analysis because he excluded part-time, full-year employees, including one-quarter of all teachers (a major public sector occupation). In total, that means approximately 12,700 people were missing from his analysis, an exclusion that made the public employee pay gap appear smaller than it otherwise would have been.

In his rebuttal, Keefe ignores this point. Instead, he defends his decision to exclude all part-time employees—something that CUF never criticized. This clever bit of rhetorical misdirection makes it appear that Keefe and EcPI address our criticisms while actually ignoring them.

Even if Keefe had been correct in his decision to exclude part-year full-time employees (including teachers) from his analysis, he still should be analyzing a sample of approximately 60,000 people. Instead, he’s looking at 44,280—over 15,000 fewer people than there should be for this study to be accurate.

In total, Keefe left out about 40 percent of the employees who should have been included in the analysis—28,213 people. It’s unclear whether they were excluded intentionally, or because of lack of knowledge of the data being used. What is clear is that the tens of thousands of missing people in Keefe’s analysis seriously biased his results.[iv]

UNREALISTIC ASSUMPTIONS

CUF also criticized Keefe’s original analysis for inappropriately controlling for the size of an organization that an employee works in. Keefe assumed that any employee currently working in state government would otherwise be employed in a large private sector business with 1,000 or more employees. It’s like arguing that every tech support person in the Department of Motor Vehicles is qualified to work at Google or Microsoft—a plainly unrealistic assumption.

Once again, instead of responding to our criticism in his rebuttal, Keefe ignores it. He defends his decision to include a con

trol for organization size—a decision that CUF never criticized (and, in fact, agreed with, even though we disagreed with the manner in which he controlled for size). This rhetorical sleight of hand again makes it appear that Keefe addresses our criticisms instead of cleverly avoiding them.

As the chart below demonstrates, well over half the employees in the private sector are employed by companies with fewer than 1,000 employees. Keefe’s unrealistic and inaccurate assumption that each state public employee would be qualified to work in the largest size company (with traditionally better benefits) significantly biases his results. Correcting for this error alone turns a public employee compensation penalty in the range of 2 to 4 percent into a compensation premium of 3 percent.



CONCLUSION

In his original analysis released by the Economic Policy Institute, Dr. Keefe found that public employees suffered a 4 percent compensation penalty relative to similar employees in the private sector. Correcting for errors in that analysis, the Center for Union Facts demonstrated that the 4 percent penalty is actually at least a 5 percent premium—a 9 percentage point margin. Keefe and EcPI made an attempt to defend their errors, but—as we’ve shown here—those defenses amount to more rhetoric than substance.

The conclusion of our original piece still stands: public employees are overpaid.

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[i] Jeffrey H. Keefe. “Debunking the Myth of the Overcompensated Public Employee.” Economic Policy Institute, September 2010.

[ii] Andrew Biggs and Jason Richwine. “Are California Public Employees Overpaid?” Heritage Foundation Working Paper.

[iii] Jeffrey H. Keefe. “Desperate Techniques Used to Preserve the Myth of the Overcompensated Public Employee.” Economic Policy Institute, March 2011.

[iv] See table A4 in “The Economic Policy Institute is Wrong: Public Employees Are Overpaid.” Center for Union Facts.

The chances of the Employee Free Choice Act (EFCA aka “card check”) advancing in this session of Congress are virtually nonexistent. At least that’s what one of labor’s staunchest supporters in the U.S. Senate is telling the media:

“It’s not going to happen now,” [Democrat Sen. Sherrod] Brown said on WVIZ radio in Ohio.

The Hill reports that the Republican landslide last November swept away any hope “supporters of EFCA”  had for rewriting pro-labor union legislation that “might make it more palatable and allow it to be passed in a modified form.”

There is an interesting story in the Washington Post about the District of Columbia’s teacher evaluation system, known as “IMPACT.” The Washington Teachers’ Union hates IMPACT, as it allows administrators to more ably determine which teachers are succeeding and which teachers are failing — and gives schools a tool to get rid of the failing teachers.

What’s interesting about the Post piece is a conversation between a teacher and his evaluator at the end of the story. It neatly encapsulates the way that teachers unions and their members entirely miss the point of evaluation systems:

Bethel gave him the final score, which was low. If the trend continued, Harris realized, he could lose his job.

“It’s just — I don’t feel that I’m putting in ‘minimally effective’ effort at all,” he said.

For Bethel, this was most excruciating part of the job. He began shutting off his computer.

“This does not measure your effort,” he said, packing his bag. “But I do see your effort, Mr. Harris.”

“So — what is this measuring?” Harris asked.

“It’s measuring the effectiveness of that effort,” Bethel said. “This is not a reflection of your passion for education, your love for students. Not at all.”

Teachers unions often make the argument that their members are working as hard as they can and they shouldn’t be held accountable for their successes and failures — they should just get an “A For Effort” and continue moving up the pay scale and seniority ladder. This mentality has failed: Prior to the implementation of IMPACT, almost every Washington, D.C. teacher received a satisfactory rating and very few were fired for performance. What did that get our nation’s capital? Abysmal graduation rates and children who couldn’t read or do math. Giving effort is commendable, but getting results is what matters.

The American Federation of Teachers has been trying to make a difficult pivot for quite some time. Understanding that public sentiment against union excesses and the protection of bad teachers is on the rise, they have tried to paint themselves as reformers while also disputing the fact that “teacher tenure” is a codeword for “job for life.” So it was with some interest that I saw the head of the AFT, Randi Weingarten, make the following admission:

[Teacher tenure] has effectively become in some places a job for life, which is wrong.

(Of course, Weingarten and her union still aren’t in favor of scrapping tenure. They just want to amend it, slightly decreasing the amount of time it takes to fire a bad teacher.)

Back to my point: It’s interesting to see Weingarten finally admit that tenure is, indeed, effectively a “job for life.” Because for years now, she has adamantly and vehemently denied that was the case. Let’s go to the videotape!

“So tenure is, you know, let me do a little bit of myth busting here. One, tenure is not a job for life. What tenure is, is that … you get a hearing before you get fired.” Randi Weingarten, MSNBC, 1/13/2011

“It’s been repeated so often that many people think it’s true. Bad teachers cannot be fired because they have an ironclad fortress called tenure. It’s simply not so. Teachers do not and should not have a job for life. It’s a red herring to say that tenure keeps bad teachers in the classroom.” Randi Weingarten, CBS News Sunday Morning, 10/3/2010

“Tenure is, is simply — tenure is not supposed to be a job for life. All tenure is supposed to be is that if somebody is told that they’re not good, they have a hearing. That’s all it’s supposed to be.” Randi Weingarten, CNN, 3/12/2010

“There are some folks who think tenure means a job for life, which it does not mean.” Randi Weingarten, New York Post, 6/24/2009.

We’re glad that Weingarten has reversed her longstanding position that tenure is not an effective guarantee of a job for life. We just wish that she would join us in working to abolish the problem, not amend it. We need to get bad teachers out of the classroom, and quickly. Tenure and half-hearted measures of tenure “reform” stop that from happening.