EBRI: Pay, Benefits Cost More in Public Sector

April 7, 2005 (PLANSPONSOR.com) - Costs for the compensation and benefits of state and local government workers was a whopping 46% higher than their private-sector counterparts in 2004, the Employee Benefit Research Institute (EBRI) said.

In a report from the non-partisan agency, it was concluded that the cost of public-sector pay was 40% higher – and the cost of benefits was 60% higher – than what was seen in the private sector. Average costs for compensation in the public sector were $34.72 per hour, while private-sector employees only made a total of $23.76 on average, the study reported.

What is the reason for the disparity? EBRI believes that the large difference in sector pay and benefits is due to a higher level of education and unionization in the public sector.

“A large portion of state and local governmentworkers are concentrated in occupations such as teachers, police, andfirefighters, which require higher levels of education or involvegreater physical risk or training and tend to be more highly paid,” according to EBRI. By comparison, EBRI states, the largest percentages of private-sector employees are in sales and office occupations, which require less training and/or risk.

With over 54% of state and local employees working in the education sector – where the average compensation figure is $37.40 per hour – this could help account for the large disparity, EBRI believes. Of all the sector workers, teachers make the most, at nearly $50 an hour on average.

In contrast, 47% of all private-sector workers work in the services sector, while 23% worker in the trade, transportation and utilities sectors. The average compensation figure for these two groups was $20.05 in 2004.

Benefit costs are also higher for public-sector workers, EBRI reveals. The average cost-per-hour for health insurance in the public sector was $3.49, compared to only $1.56 in the private sector. The disparity was similar for retirement plans.

Participation was also higher in the public sector, with 86% of employees participating in health care plans and 98% participating in retirement plans. In the private sector, these figures were 66% and 60%, respectively.

Unionization is seen as a cause of both pay and benefits costs being higher. Thirty-seven percent of public workers are unionized, compared to only 8% of private workers.