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1 Michigan Private and Public Employee Compensation Compared Professor Jeffrey Keefe, Ph.D. School of Management and Labor Relations Rutgers University.

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Presentation on theme: "1 Michigan Private and Public Employee Compensation Compared Professor Jeffrey Keefe, Ph.D. School of Management and Labor Relations Rutgers University."— Presentation transcript:

1 1 Michigan Private and Public Employee Compensation Compared Professor Jeffrey Keefe, Ph.D. School of Management and Labor Relations Rutgers University

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4 Battle Began in New Jersey with the Election of Chris Christie as Governor in November 2009 Christie Declared War on the NJEA, Overpaid Teachers and Other Public Employees

5 Governor Debates Parent at School Town Hall Meeting "You want to come up here?" Christie shouted. "You come up here.” Chaudruc, who stands 5’6" and weighs about 160 pounds, backed away until the governor insisted "bring him up here," and a state trooper escorted him to the stage.

6 There are “two classes of people in New Jersey: Public employees who receive rich benefits, and those who pay for them. Gov. Chris ChristieGov. Chris Christie (R)

7 7 It's time: Freeze N.J. public workers' pay, change bargaining rules. Star-Ledger Editorial Board/The Star-Ledger. Feb 28, 2010

8 Selective Omissions? The Star-Ledger failed to make an appropriate comparison of public and private employee compensation before declaring that public employees are over compensated. The editorial board, rushing to reach its conclusion, selectively omitted local government employees in their graphic comparison. Using The Star-Ledger’s data source, we find that New Jersey local government employees were paid $54,245 annually on average, some $684 dollar less than the average private-sector employee. A critical oversight, since local government employees account for 75% of New Jersey public employment. Th is omitted fact, important as it may be for a balanced assessment, however, did not support the Board’s preferred “nuclear option” for public employment

9 Michigan’s Election Republican Run Against Overpaid Public Employees

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11 Rick Snyder to bring public employment costs down to private-sector averages Public employees in Michigan receive compensation packages that are generally more expensive than in the private sector, and the biggest disparities exist in the cost of benefit packages. The difference between the two is estimated at $5.7 billion. A new study details the costs for one type of benefit - retirement packages - and shows that the benefits provided by the state's two largest pension plans are substantially out-of-line with the private sector. Retirement benefits in the plans cost between 19 and 37 percent of employee wages, while the private-sector equivalent among major Michigan employers is around 7 percent. Thus, members of these two plans receive benefits that are 3 times to 5 times higher than private-sector retirement benefits.

12 Drumbeat growing louder on the benefits issue. "There are two questions we have to ask — what's affordable and what's comparable with the private sector," Snyder said in a recent interview with The Detroit News. "There are changes that need to be made." He said it's a bigger issue at the local and school level than at the state level, since state employee benefits have been reduced. The Mackinac Center puts the annual cost of excessive public sector benefits in Michigan at $5.7 billion, with about $2.5 billion of those pension, health care and other fringe benefit costs found in public schools; $1.7 billion in local government; $844 million in colleges and universities; and $708 million in state government.

13 2011 Citizen’s Guide to Michigan’s Financial Health Presented by Governor Rick Snyder Dollars and Sense: How State and Local Governments in Michigan Spend Your Money

14 Private Sector Employee Compensation $39,986?

15 Governor’s Employment Levels? Apples to Creamed Corn?

16 Government Analysis: Apples to ? According to an analysis of BEA data by Donald Grimes, senior researcher in the University of Michigan's Institute for Research on Labor, Employment and the Economy, 2009 average compensation in the private sector rose to $52,365 Michigan's public-sector workers fared much better. By 2009, average compensation for state employees — which includes, among others, college professors and big-name coaches — totaled $62,237. For local government employees, average compensation equaled $57,333, an increase of percent, or more than twice the gain for the private sector.

17 17 Are Michigan Public Employees Overpaid? Compared to Whom? Similar Michigan Private Sector Employees What do we need to make a comparison? Wages and Salaries are Insufficient Employer Cost of Employing a Worker How Should We Make the Comparison?

18 18 How Should We Make a Comparison of Employee Cost ? Full-Time Workers Similar Education Level – Starting Point Wages and Benefits Costs Organizational Size Matters for Benefits Hours of Work

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21 21 Search for Valid and Reliable Benefits Data to Estimate Employment Costs Bureau of Labor Statistics (US, DOL) National Compensation Survey "Employer Costs for Employee Compensation, December 2009" with unpublished detailed compensation data for the Middle Atlantic Census division. (New Jersey, New York, and Pennsylvania. These data are unpublished Bureau of Labor Statistics figures.

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23 23 Data Sources Miriam King, Steven Ruggles, Trent Alexander, Donna Leicach, and Matthew Sobek. Integrated Public Use Microdata Series, Current Population Survey: Version 2.0. [Machine-readable database]. Minneapolis, MN: Minnesota Population Center [producer and distributor], 2009 Data Used for Analysis – Michigan CPS Subsample Real earnings adjusted by CPI for Urban Wage Earners, BLS. Bureau of Labor Statistics (US, DOL) National Compensation Survey "Employer Costs for Employee Compensation, 2010" with unpublished detailed compensation data for the Middle West East North Central Division.

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26 Gov. Snyder signs controversial emergency financial managers measures

27 Gov. Rick Snyder ignored the protests Gov. Rick Snyder ignored the protests of thousands of angry union members at the Capitol and signed legislation giving broad new powers, including the ability to terminate union contracts, to emergency financial managers appointed by the state of Michigan to run struggling cities and school districts.

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