Special Features of Public Sector Pay

Let’s talk about the real differences between pay in the public sector and pay in private industry.  Low pay for people employed at cities, counties, state governments and some (if not most) federal agencies is frequently either casually dismissed with shallow responses or fiercely debated as tempers flare. 

After many years experience working on pay practices in virtually every industry (and some hardly anyone had ever heard of), the differences in government service seemed obvious to me.  Nevertheless, the first draft of my thoughts was forwarded to scores of public workers, government supervisors and elected officials.  No one objected to anything in it.  Most asked for permission to forward it to others who had been puzzled by the very dynamics it explained.  

Key points follow, covered in detail in the original article that was eventually published in 2005. 

Unique Organizations Create Problematic Peer Comparisons

Public enterprises provide substantially different products or services than private firms.  Most government services providers don’t face competitors like private firms.  There are fewer "like enterprises" competitively engaged in substantially the same business.  That makes it difficult to find valid benchmarks against which one can compare a job's content and pay rate.  Making meaningful comparisons for pay decisions between different government bodies can be almost impossible.

Broader Pay Ranges Exacerbate Final Choices

The wider salary variances found among candidates for professional and management jobs encourage public employers to bargain-shop and hire at bottom pay levels.

Public Managers Get Less Pay Due to Low-Ball Hiring Rates 

Public enterprises are hypersensitive to the need to avoid the perception that they are wasting taxpayer money.  So, when given wide options for management pay, they typically lean to the conservative side and select people willing to accept less money in exchange for a promise of job security or other non-cash perquisites.  As a rule, especially in conservative areas where living costs and wage expectations are low, the higher you rise in a public enterprise, the more your pay lags behind your peers in the private sector.

Good Government Work Rarely Brings Financial Rewards

Public employees rarely receive bonuses, extraordinary raises or even recognition for good work.  If something is done right... well, that is what the taxpayer expects.  So no special reward is due.  But if anything is done wrong and the public finds out, heads roll.

Public Service Means Defensive Tactics Prevail

Corporate officers report to highly experienced Boards of Directors who do not panic easily.  Elected officials serve at the pleasure of the voters, who panic over everything.  The continuity of senior leadership in the public sector is constantly held hostage to the current mood of the electorate.  Elected officials and their appointees, whether arrogant reformers or entrenched caretakers of the status quo, therefore emphasize problem prevention and damage control.

Going With the Flow Is Encouraged

Workers who calmly produce non-controversial results in government service are most likely to get ahead.  If consistently successful, they will become very underpaid for the responsibilities they exercise while very overpaid for the results they produce.

Don’t Blame the Victims

Nothing here should be interpreted as criticism of people who did not create these dysfunctional dynamics.  Those who embrace the special challenges of public service should not be condemned for merely doing what they are rewarded to do.  Instead, they deserve our sympathy for being forced into this kind of adaptive coping behavior by a political management system that gives a higher priority to risk avoidance than to achievement.  Government employees work within systems driven by defensive preventive pressures, while business workers are more frequently encouraged to achieve positive results.  Simply being constantly in the public eye forces  management to adopt very different attitudes towards achievements and remuneration, because  every expense will be challenged and any error will be condemned.

If you thought they had it easy, it might be time to cut them some slack.  So… what did I miss?

E. James (Jim) Brennan is Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. After over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.), serves on the Advisory Board of the Compensation and Benefits Review and will express his opinion on almost anything.

Creative Commons image "U.S. Capitol" by cliff1066

Comments

[Tony Bergmann-Porter]

What's the value of lifetime tenure in a position from which, on all evidence, you cannot be fired?

[E. James (Jim) Brennan]

Academic professorships are quite secure, indeed, Tony. Not sure that every public job is totally secure, though... Federal civil service jobs might be most sticky, but (despite the efforts of AFSCME) State, county and municipal jobs frequently depend on the whims of elected officials who periodically change. A change in administration can mean sweeping changes in employment.

Nevertheless, there is little doubt that the relative security of a job is a major retention element in the employee value proposition.

[Noel Trusty]

I think the environment has changed significantly since 2005.

Since the financial crisis we have been in since 2008 and the efforts to unionize government employees, I believe the situation is reversed now. Look at the scandals surrounding the payment of bonuses to IRS employees, VA employees, etc. The federal government bailed out the state and local governments so the government employees (and teachers) could keep their jobs, while private sector employees were being laid off. I also think it is much more difficult to take disciplinary action (i.e. firing) against government employees, so poor performance is in fact condoned and rewarded.

[Jacque Vilet]

Funny to me. University prof is the only job I know of that gets tenure ------ except for the Supreme Court. Isn't it time we changed that? Even people in higher ed say they should be under contracts.

[E. James (Jim) Brennan]

Yes, academic and government jobs have traditionally been more secure than those in the private sector. The trend has only strengthened with the principal union growth in recent years coming among public workers. Strong employee protection systems confronting weak managers usually result in enhanced job security. That applies to most academic and government jobs, from teachers to IRS agents. Don't know how we can change that from the outside.

[Tony Bergmann-Porter]

"Don't know how we can change that from the outside."

- outlawing or drastically restricting public service unions would IMHO, be a logical and effective place to start.