Thursday, September 02, 2010

Forbes Mag: Government Pay: Now For The Really Bad News

Government Pay: Now For The Really Bad News

John Tamny, 08.30.10, 06:00 AM EDT

High federal pay means less capital formation, lower wages and reduced innovation.

By now, most Americans are familiar with the newly revealed statistics concerning federal pay. As we slept, as it were, our federal minders awarded themselves impressive pay/benefits increases that average out to $123,000 per year, compared with $61,000 in the private sector.

This is remarkable on its face considering that those of us in the private sector produce goods and services to earn our wages, while a federal government that lacks resources must expropriate our wealth in order to fund its own activities. To put it simply, federal employees have enjoyed larger average pay and benefits increases for nine straight years, and their benefactor has been us.

To say things are presently upside down is to describe the present situation very mildly. Most of us in the private sector have naively believed for a long time that in return for job security and the ability to work free of the profit-and-loss worries, that government workers have accepted reduced compensation. It's apparent now that all the benefits of "public service" apply, plus the pay trumps by far what one could hope to command in the private economy, recession or no recession.

Sadly, however, that's not even the bad news.

Indeed, as the defenders of federal pay would no doubt tell us, the comparison between federal and private workers isn't an apples to apples comparison. To hear them say it, federal workers have on average higher skill sets and are often advanced when it comes to education.

This should in no way appease us. If it's true that government workers are more educated and in possession of greater skills, then it's also true that a still-difficult economic situation has been made more difficult by virtue of some of our best and brightest offering their skills to the inefficient government sector over the private economy. Their gain is the recessed economy's loss.

It should also be remembered the perverse incentives that exist among federal workers. Not able to advance based on profits, and doing more with less, workers in the government succeed the more the bureaucracy they work for grows, the more lawsuits they win against private actors, the more regulations they impose, and the more fines/fees they lift from the increasingly empty hands of the average American taxpayer.

Not only are we fleeced to cover the rising pay and gold-plated benefits of federal workers, we're essentially paying them to make our lives more difficult. The more they're able to do so, the more they advance.

Considering private businesses, whatever their size they all started out small. And irrespective of their size, businesses need "human capital" in order to grow.

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