Lies, damn lies and union statistics

OCT. 24, 2010

California’s public employee unions have taken the public for suckers for years, so it’s understandable they now think they can play us for fools.

A study released Monday by a think tank that specializes in pro-union advocacy purports to show that public employees receive less total compensation than their counterparts in the private sector. Unfortunately, the study is being depicted in the media as a serious analysis that debunks public hysteria about overpaid and over-pensioned public employees in cities such as Bell. But it’s nothing of the sort.

“This is the kind of paper where they started with a conclusion and tailored the research around it,” said my Pacific Research Institute colleague Jason Clemens, an economist who directs PRI’s research efforts. Basically, the researchers took the total wages in the public and private sectors, averaged it out and then adjusted for educational levels and several other factors.

The researchers didn’t look at, say, a private sector janitor with a set amount of experience and compare his total compensation package to a similarly skilled janitor in the public sector. “Instead, the study relied on education levels —- ‘the single most important earnings predictor’ —- and other factors widely found to affect compensation levels, such as gender, race, ethnicity and disability, to compare the two sectors,” reported the San Francisco Chronicle. They also adjusted for average employee age.

How anyone could report that without noting that such an approach is bogus, is beyond my comprehension.

In the public sector, people have an overall higher level of education so the researchers base their paper on the idea that they therefore should be earning more money than those in the private sector, and adjust the date to reflect that judgment. The authors of this study, “The Truth About Public Employees In California: They Are Neither Overpaid Nor Overcompensated,” produced by the Institute for Research on Labor and Employment, assume that education levels, seniority, credentialing and other factors —- inputs, in the words of economists —- matter more than outcomes, productivity and performance, according to Clemens.

In simple terms, I know someone with multiple degrees in various subjects who has few marketable skills and therefore had a low-level job in a school district. The researchers would assume that such a person should have an extremely high salary because of his credentials. I judge my reporters based on their reporting, not on the number of degrees they hold and I don’t adjust their pay based on gender, ethnicity and age issues. It’s based on how well they do their job.

That’s the basic problem, but the study is undermined by other substantial flaws. It focuses on “full-time public and private sector employees, who represent over 80 percent of the state’s labor force, and by controlling for hours worked per year.” That’s very convenient. They can then leave out low-paid agricultural workers in the private sector and small business owners, who tend to work long hours and have few benefits. Controlling for hours allows them to ignore the overtime abuse common in the public sector. They don’t appear to deal with the many pension-spiking schemes that government employees have mastered, but which are not available in the real world.

James Sherk, a labor economist at the Heritage Foundation, notes that the study doesn’t include federal employees in the survey and federal workers are paid far more than others. He also noted that “This study only looks at part of the benefits paid to state and local employees. It ignores the retiree pension and health-care benefits they get but which the government has not set aside enough money to cover. If the study included the more than $500 billion in unfunded government pension costs in California then state and local employees would not appear remotely under-compensated.”

How can an empirical study not look at the full value of a benefit that often is worth millions of dollars to individual employees?

The researchers failed to include the value of retiree health benefits, according to an analysis by CPA Marcia Fritz, president of the California Foundation for Fiscal Responsibility. The study, she notes, doesn’t adjust for the reality that teachers do not work a full year. It doesn’t adjust incomes even though private employees have money deducted for Social Security and most public employees do not have such deductions. She argues that had the researchers accounted for the true cost of retiree benefits that it would boost public sector wages by 15 percent. These are unconscionable flaws in research, although we shouldn’t think of the study as research.

It is a political screed. The introduction complains that “government workers have been vilified.” Throughout the report, it makes its point: “Thousands of California public employees have lost their jobs and many more have foregone pay through forced furloughs and their families have experienced considerable pain and disruption. … They were simply casualties among a list of hard working innocent victims of a financial system run amuck.”

The political overtones should not be a surprise. This is, after all, one of the two University of California labor centers whose funding had been slashed by the Schwarzenegger administration, then partially restored by UC after intense pressure from legislative Democrats. Recent studies tilt hard to the left, such as “Voices for Justice: Asian Pacific American Organizers and the New Labor Movement.”

How many of you in the private sector get guaranteed pension benefits at all, let alone promises of 80 percent to 90 percent of your final year’s pay, cost of living adjusted for the life of you and your spouse, available in your early 50s? Yet these are common in the public sector. How many of you get health benefits at the level offered in the public sector? Check out the salaries up and down the government pay scales and it’s a real eye opener. Look at California’s fiscal mess and at its pension debt, estimated as high as half a trillion bucks.

All the taxpayer-funded union spin —- even if it’s gussied up in a study produced at Berkeley —- can’t undermine the truth.

–Steven Greenhut