State workers overpaid (updated)

This is what we are told by this NZPA article at stuff.co.nz. The article reports on research by Dr John Gibson, Professor of Economics in the Management School at Waikato University.

The research was published in the New Zealand Journal of Employment Relations and used the New Zealand component of the International Social Survey Programme Work Orientations Survey. It compared like-with-like work.

The article quotes Gibson as saying

"The average pay differential between the public and private sector was between 17 percent and 21 percent,"

The article also notes that

The study was based on 2005 data, so given the faster rate of public sector pay rises recently, the premium was likely to be even higher now.

The stuff report goes on to say

"In addition, public sector workers appear to benefit much more from a `warm glow' belief that in their job they can help others and that their job is useful to society.

"In competitive labour markets people would be willing to work for less to feel so good about themselves and their jobs.

"So the fact that public sector workers actually get paid 20 percent more is evidence of how out of line wage setting has been in the public sector."

It is also noted by Gibson that given that the study was able to compare like jobs with like jobs, it suggests that the higher pay levels for the public sector had little to do with needing to pay more to attract more skilled workers. In addition Gibson could find no justification for the pay premium in the public sector in terms of job conditions.

So we are left to wonder, Why are government salaries so high? I'm sure its got little to do with productivity. This article from Infometrics argues

Public sector wages have also been boosted by the promotion of collective bargaining via the Employment Relations Act 2000. A key justification for the promotion of collective bargaining is a perspective that there is an “inherent inequality of power in employment relationships”.

There is no provision within the Act for addressing circumstances where the inherent inequality favours employees. Yet public sector employment relations are such a case. To begin with, governments’ statutory powers to raise taxes mean that they do not face the same type of immediate financial pressures that inhibit wage rises in most private firms. In addition, it is difficult for citizens, the ultimate employers of public sector workers, to ensure that they are well represented in the wage negotiation process.

The article goes on to make the point

There are natural conflicts of interest between each of these parties and their ultimate employers, the citizens. Using public sector wages to illustrate: high wages improve the wellbeing of employees at the expense of taxpayers, yet the threat of unemployment to public sector workers from excessive wage demands and industrial action are negligible compared with the private sector. In addition, the political fall-out of industrial actions are potentially more serious to politicians than the cost of higher wages, which can be spread thinly across all taxpayers.

Infometrics also adds,

Promoting collective bargaining in the public sector seems a recipe for excessive public sector wage growth. Although a key purpose of government activities is to redistribute incomes from the wealthy to the less fortunate, it is not obvious that public servants, teachers, and medical practitioners are the “unfortunates” most of us have in mind.

Updated: NotPC comments on The "warming glow" of bureaucracy and adds links to more discussion of the issue while Kiwiblog notes 20% higher pay in the public sector.