Economics

Scott Walker’s reforms narrow but don’t eliminate the public-private pay gap in Wisconsin

Jason Richwine of the Heritage Foundation and I have a new AEI paper looking at salaries and benefits for state and local government employees in Wisconsin, both before and after Act 10, the controversial reforms passed in March 2011.

•    Salaries: It’s often said that public employees receive lower salaries but higher benefits—and sometimes that’s true. In Wisconsin, though, we found that salaries are actually about even between public employees and private sector workers who have similar education and experience and who work for larger employers.

•    Health coverage: Act 10 tripled state workers’ health insurance contributions and introduced co-pays and deductibles. However, even after those reforms, Wisconsin state workers receive a health package worth almost $14,000 per year, double the private sector average. Their health package is even worth 20 percent more than the average paid to government employees in the states surrounding Wisconsin.

•    Pensions: A full-career Wisconsin state employee receives a guaranteed pension benefit worth 60 percent of his final salary, plus Social Security benefits. Before Act 10, most public employees paid almost nothing for these benefits, while post-Act 10, they now contribute 5.8 percent of pay. But for a private sector worker to receive the same guaranteed retirement benefits he’d have to save over 30 percent of his salary in a 401(k). That’s how generous public pension benefits can be.

Overall, state employees in Wisconsin receive pay about 22% higher than similar private employees, down from around 29% before Act 10. Pay varies at the local level, but in certain cases—Milwaukee teachers come to mind—the pay gap is even bigger. Wisconsin’s pay reforms have accomplished a lot, but there’s a long way to go before public and private sector employees reach pay parity.

One thought on “Scott Walker’s reforms narrow but don’t eliminate the public-private pay gap in Wisconsin

  1. This is exactly the kind of dialogue that we need. It would help if footnotes (i.e., references) were provided for those who have been propagandized. I suppose it would be asking too much for a little sacrifice to preserve the solvency of the state. In today’s environment, people should be happy that they even have a job.

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