PUBLIC VS. PRIVATE COMPENSATION
March 6, 2007
Alabama state employees are paid more and work less -- on average, four and a half weeks per year less -- than their relative counterparts in the private sector, according to a new report by the Alabama Policy Institute (API).
- Alabama state employees have higher wages than would be expected at its relative economic level (based upon personal income per capita).
- Alabama state employees are paid for working, on average, almost two days less per month than private employees, and salaries of Alabama state employees increase at a faster rate than in the private sector.
- Over a career, an Alabama state employee is estimated to receive $350,000 more in compensation (wages, salaries, and benefits) than an equal-education, equal-skill employee working the same number of hours in the private sector.
- The excess cost of Alabama state employee compensation appears to be between $295 million and $360 million annually, or $169 to $209 per household annually.
The principal problem, as it is in most other states, is that government employee compensation is established through the political processes, not through the market processes.
As a result, lawmakers should consider reforms to make the state employee workforce less costly, says API. For example:
- Determine what services or programs could be contracted out to the private sector, hold a hearing and use competitive bids and contracts wherever possible.
- Reduce the number of paid state holidays to bring Alabama in line with the average of other states, as well as with federal holidays; and reducing the cost of overtime for those essential employees who are required to work.
- Require all Deferred Retirement Option Plan (DROP) program enrollees to retire once they have completed their enrollment period; any employees deemed critical for retention could be hired on a contract-employee basis as needed.
Source: Wendell Cox, Public vs. Private Compensation: A Comparison of Public and Private Compensation in Alabama's Workforce," Alabama Policy Institute.
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