Growing Gap between Gov't and Private Sector Benefits

Michael Mandel, former chief economist for BusinessWeek, is now writing on his own blog. Please consider his latest post on The Growing Gap between Govt and Private Sector Benefits.

When I was out in Kansas City at the Kauffman Foundation’s Economic Bloggers Forum, Mish Shedlock of the blog Global Economic Trend Analysis made a persuasive case that state and local finances were completely broken because gov’t workers were overpaid compared to the private sector. ( See here for one of his posts on the subject).

Mish got me thinking…So I decided to assemble some BLS data on the subject.

Not to mince words, here’s the payoff chart, that compares the benefits of state and local workers with private sector workers. (These figures are adjusted for inflation, and indexed to 2001I=100).

Yowza! Somewhere in 2004, the world changed, and we didn’t realize it. Employers in the private sector put a lid on the cost of benefits (which includes healthcare, retirement, vacation, and supplemental pay of all sorts). Meanwhile the cost of benefits in state and local govt jobs just kept rising, with barely any break, both before and after the financial bust. This is not good

In the private sector, adjusted for inflation, employer spending on retirement benefits stagnated between 2004 and 2009. That’s right, just flat, even before the financial bust.

By comparison, state and local costs for retirement rose by 30% between 2004 and 2009, in real terms.

This cannot continue.

Those are just two of the six charts Michael put together. Please click on the top link to see the rest. It is well worth a look.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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