I’m underpaid

According to Yglesias, who demonstrates an incredible level of mis-understanding about federal employment for someone who talks about it so much, I’m underpaid. Maybe I should set up a tip jar in case anyone wants to take pity on me.

Here’s his take on what’s going on:

The federal government needs to fill some jobs. But it offers salaries that are less than the salaries that a person doing a similar job could get in the private sector. Naturally, this means that the federal government ends up attracting less-experienced applicants. Hiring is then done from this less-experienced pool. And since the people who are hired are doing jobs they’d be underqualified for in the private sector, they are making more money than they would be in the private sector.

Broadly, there are two types of federal jobs. A minority of the jobs consist of well-educated people doing the actual work of their agencies. A majority of the jobs consist of "support staff" (i.e. diversity hires).

There is no way to say that the latter type of federal employee is overpaid. Many of these people are unemployable in the private sector. They certainly have no options outside of government and everyone (even Congress!) knows it. (Also see Heather MacDonald). A secretary without a college education making $65,000, with a pension, perfect job security and incredible benefits is way, way overpaid.

Yglesias’ analysis applies only to the former type of jobs. In this somewhat limited case, he’s largely correct. Many people with Federal government jobs could get higher-paying jobs – at least nominally. Here’s how it might work.

Let’s say you’ve got a government job that pays you $100,000. You could find some private sector job that pays you $140,000 that requires you to work 50-75% more. Is this a raise?

You might also be able to find a job that would pay you $115,000 but that would have lower benefits and much lower job security. Is this a raise?

For some people, the answer to both questions will be "yes" for others the answer will be "no." Some people leave for these "higher paying" jobs, but most stay and would not consider leaving unless their pay was virtually doubled. This indicates to me that pay is generally too high. However, people value benefits, pensions and absurd job security in different ways.

In my experience, quotas (diversity and particularly with respect to hiring veterans) do more to lower the overall quality of the federal work force than pay.

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10 Responses to I’m underpaid

  1. Handle says:

    “Get my shopboy! Ah, there you are. See here – it says my apples cost less than oranges? Apples are underpriced! Oranges are overpriced!” – “But… but Master Yglesias, already at these prices some of the apples do not sell, whereas we are constantly short of oranges, cannot keep them on the shelves, and there is a line 40-thick outside our door before opening time on delivery day, for just the change to buy an orange. Surely we ought ..” – “Silence! You shall receive a thwaking like you’ve never imagined ye scoundrel!”

    Putting job-security and ease-of-work aside, there are some things you can price. How much would it cost to buy a private annuity that paid you a constant stream of $X inflation-adjusted dollars a month and almost all of your household’s medical bills for the rest of your life starting at age 55? The average 55-year old lives another 25 years, and the latest 30-year TIPS yield only 1.74.

    For every $1,000 per month of pension, I get an expected present value of $246K. If you’ve got a pension of $4K per month, and health care for you and your wife in your age at $1K per month each, then at the risk free rate, that would be worth $1.5 Million in today’s dollars. If you had to save for 30 years at a real interest rate of 3% to get the same amount – you’d need to save over $30K per year. At 2% it’s be $37K – over $3K per month.

    Tens of Millions of Americans work hard all day and do not earn half of what the just the wage-equivalent of the accumulation of retirement benefits is worth to a federal worker.

  2. Remnant says:

    The pension issue cannot be emphasized enough. Most private sector jobs for professionals offer no pension program whatsoever. Nothing. Nada. People in those private sector jobs need to both earn enough to provide for their own retirement while also paying for the pensions of public sector workers. The difference in value between private sector jobs and the “equivalent” public sector jobs are much greater than the raw numbers imply.

  3. steve2 says:

    Hmmm. I made 90k, including bonuses in the military, and got shot at. 250k as civilian, dont get shot at and see my wife every day.

    Query- Do you research this stuff or just make up what sounds good?

    Steve

    • Foseti says:

      Obviously the military is a bit different. I make about 150k in government. The last two job offers I’ve had were for 180k with worse benefits and 225k working twice as much. I haven’t switched jobs.

    • Handle says:

      A friend of mine just “retired” (obviously he’ll keep working at other jobs) at 44 years old as an LTC with a wife and several young kids. He got shot at too, but now he’s done. He’s getting about $5K (inflation adjusted, risk-free) per month pension and family health care.

      What’s that worth in present value lump-sum at today’s discount rates? Several million dollars – which he earned in only about 22 years, boosting his official salary by nearly six figures worth of shadow future benefits accruing each year. He says it was a hard life, but overall a good deal. I think he was smart to delay having kids until late in his career.

      I also have a neighbor who was just suddenly laid off from a high paying job completely by surprise because his company decided to contract out his entire division to save a few percent on costs. I don’t condemn the capitalist logic of the decision, but the effect on his family is devastating as they did into their savings and try to figure out how an older middle-aged man is going to find a replacement occupation in this economy and unemployment rate.

      Needless to say, the LTC sometimes worried about getting killed, but he never worried a single day about losing his job. What’s that kind of security worth? How much would most people in this day and age give up in wages for that kind of assurance and peace of mind?

      Anyway, Foseti, I shot you an email, let me know what you think.

  4. prcaldude@gmail.com says:

    A minority of the jobs consist of well-educated people doing the actual work of their agencies. A majority of the jobs consist of “support staff” (i.e. diversity hires).

    Yes, but these people keep failing upward – the main reason I left my Fed job. “He can’t speak english or talk to the customer? Promote him to middle manager where he can pester everyone to get their documents updated! Raise his pay!” Middle managers in Federal employment really want to fire half their people, but they can’t. The only real way to get rid of them is to put them on overhead or find some “promotion” for them to fill.

    Still, I’ll never understand why there are so many Federal employees who were born in another country.

    Let’s say you’ve got a government job that pays you $100,000. You could find some private sector job that pays you $140,000 that requires you to work 50-75% more. Is this a raise?

    I don’t see how this is true. Are you arguing you’ll have to work 50-75% more hours, or just that you’ll have to work 50-75% harder? If the latter, then you might as well be doing something at work.

    Tens of Millions of Americans work hard all day and do not earn half of what the just the wage-equivalent of the accumulation of retirement benefits is worth to a federal worker.

    I suppose this is what keeps the competent workers there. Most people, even the very competent, have no clue how to put away for a retirement.

  5. james wilson says:

    The problem with federal work is not competence. A competent bureaucracy, it is well said, is more dangerous to liberty than a bungling one. The problem with federal work is that there is no force of creative destruction within it, rather, it is the worst performers which invariably attract the greatest infusions of money. It is not in the nature of a civil servant to ask if government has any business doing a task in the first place, and government, by its nature, has a need to touch everything.

  6. davver says:

    You obviously don’t deal a lot with six figure professionals that are considering government. They are all vastly underpaid, so much so that we end up with the worst people doing the most important jobs.

    In Singapore they pay seven figures to their financial regulators. As a result that tiny island state is a model of financial efficiency. In America we pay our financial regulators 20% of what they can make elsewhere, then are surprised when they write regulations favoring investment banks and then take jobs with those same investment banks paying way more.

  7. […] – “Blacks and Gays“, “I’m Underpaid“, “Tom Lamont“, “HBD, Taxes and […]

  8. hemp says:

    Federal employees earn higher average salaries than private-sector workers in more than eight out of 10 occupations a USA TODAY analysis of federal data finds.Accountants nurses chemists surveyors cooks clerks and janitors are among the wide range of jobs that get paid more on average in the federal government than in the private sector.Overall federal workers earned an average salary of 67 691 in 2008 for occupations that exist both in government and the private sector according to Bureau of Labor Statistics data. Decreasing overall federal pay by 35 000 a year to bring it in line with private sector pay would result in a savings of 35 000 X 2 153 000 75 355 000 000 That s 75 billion 355 million dollars a year! In a decade that is over 750 billion in savings Three-quarters of a trillion dollars! by simply bringing federal salaries into line with those of the private sector who create the wealth of this nation which pays the bills.Government labor unions especially Barack Obamas partners in crime SEIU are the biggest threat there is to this nation and its economy.

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