How “Overpaid” Government Professionals Reduce Public Expenditures

I was once the token scientist member of a team that was tasked with buying a research building for a government agency in Northern California. I know nothing about construction or real estate, but was there to describe how much space it takes to install a wet lab, what computer networks are needed for intensive data computations and the like.

The team included a veteran of many such junkets from whom I learned a great deal. I looked at a building that I judged fit for purpose and he said “Come with me”. He opened what looked like a broom closet and pointed to an exposed part of the wall structure. He then said a series of words I can’t precisely recall, but it sounded something like this:

“Do you see those? Those are 9-framis rebolted I-frame lattice Acme doo-hickey beams. They can’t stand cross-twisting sheer forces over 10,000 thingamabobs”.

“What does that mean?” I asked.

“It means that if a Northridge-style earthquake happened here, this building would probably fall over and kill everyone inside it.”

“Good to know” I said.

Climbing on the roof of another building, he walked far from where the realtor directed our team on a bright sunny day and found a pool of water, proving that the roof was warped at a level not visible to the untrained eye. I also learned that day that when a $25,000 air conditioning unit is sitting on a building for sale and looks strangely new and is not even bolted down, you should expect the original, old, broken unit to be back in its usual place by the time you make your purchase.

This talented government professional’s annual salary was less than one third of the commission that the realtor stood to make on the sale of the building. How much money he saved the taxpayer that day would be hard to estimate, but it was certainly many times his annual salary and perhaps as much as his lifetime salary.

Imagine now that “overpaid” government workers like him continue to be denigrated in the public square and continue to have their wages cut. How long will it be until one of them decides that a donation from a slimy realtor to their kid’s college fund is enough reason to overlook a few pesky 9-framis rebolted I-frame lattice Acme doo-hickey beams? Or even more likely, how long will it be before the best professionals leave the public sector, and the only people who will take poor paying (by private sector standards) professional jobs in government are those who don’t even know what a 9-framis rebolted I-frame lattice Acme doo-hickey beams is?

The reality of government is that the spread between what an employee makes and the amount of money they influence can dwarf that seen in the private sector. If you don’t want to see billions of your tax dollars go to waste, as they did on contracts in Iraq, then you should be more than willing to pay top dollar to government professionals who have the brains and integrity to keep a careful eye on your money.

Author: Keith Humphreys

Keith Humphreys is the Esther Ting Memorial Professor of Psychiatry at Stanford University and an Honorary Professor of Psychiatry at Kings College Lonon. His research, teaching and writing have focused on addictive disorders, self-help organizations (e.g., breast cancer support groups, Alcoholics Anonymous), evaluation research methods, and public policy related to health care, mental illness, veterans, drugs, crime and correctional systems. Professor Humphreys' over 300 scholarly articles, monographs and books have been cited over ten thousand times by scientific colleagues. He is a regular contributor to Washington Post and has also written for the New York Times, Wall Street Journal, Washington Monthly, San Francisco Chronicle, The Guardian (UK), The Telegraph (UK), Times Higher Education (UK), Crossbow (UK) and other media outlets.

36 thoughts on “How “Overpaid” Government Professionals Reduce Public Expenditures”

  1. As I was reading this post, I realized again why I read the RBC. Thank you.

    BTW, I think of these things Keith brought up every time I’m at my daughter’s school and I see the teachers doing their thing. We try and make up for it by bringing produce from the veggie garden, flowers from the ornamental garden, occasional dishes from the kitchen, and so on. We must resist low-lifes trying to denigrate teachers and public education at every opportunity; we try and do it in our own, quiet ways.

  2. The reality of government is that the spread between what an employee makes and the amount of money they influence can dwarf that seen in the private sector.

    I’m not sure of this. I’ve worked most of my career (entirely private sector) as the expert on decision-influencing calculations at least in the 10’s of millions, and quite often in the hundreds–and I make a little over the median income.

  3. I’m sure I’ve told the story somewhere on the internet about how I had to explain to a government procurement official that when there’s a list of countries that get a procurement preference because they are participating in a military campaign with the US, and one of the entries on the list is “Korea” it means one and not the other. Yeah, there really are two. Only the two. And yes, we really are able to tell which one they mean.

  4. ““Do you see those? Those are 9-framis rebolted I-frame lattice Acme doo-hickey beams. They can’t stand cross-twisting sheer forces over 10,000 thingamabobs”.

    “What does that mean?” I asked.

    “It means that if a Northridge-style earthquake happened here, this building would probably fall over and kill everyone inside it”.”

    This isn’t really a story of government success, it’s a story of government failure. The building inspector failed, that’s why a Northridge-fragile building was on the market. All your guy was doing was ensuring that the people who will die in the building when the earthquake comes will not be from your agency.

  5. Dave Schutz: not so fast. The building could’ve been up to code when it was built.

    I’ve run into people like that. I think they’re all over, you just have to look. Mine was an insurance adjustor, who explained to me that my car — which I still drive — wasn’t really totaled, as my dealer mechanics had told me. “They don’t really go there with me, ” is how he put it. The combo of intelligence, experience and integrity — you just can’t beat it.

  6. Dave Schutz, the fragile doo-hickey beams may or may not be a failure of government, but without more information we can’t assume they were the failure of the building inspector. He can only enforce the code, and the code may not call for ‘Northridge-proof,’ even in northern California. It could be that Northridge-proof was decided against as a job-killing imposition by the nanny state. This would indeed be a sort of failure of government, or perhaps a hamstringing of government or….

  7. Haven’t seen lamentations concerning salaries paid to government engineers, scientists and so forth in the public square that I occupy. But I have read many pieces concerning the salaries paid to firefighters, prison guards, cops, and administrators at public agencies. Care to argue either (1) that a relevantly large proportion of the people that hold those positions have higher paying options in the private sector; or (2) that there exists a shortage of qualified applicants to replace the ones that are lucky enough to have a better paying alternative outside of government?

  8. Generation Y:

    Here’s my argument: If you pay cops less, police work will be a less attractive option, and on the whole you will get less qualified cops. (Not “fewer,” “less,” talking about the whole population of cops.) Ditto all those other positions. Care to argue that salaries in those positions are so high that lowering them won’t reduce the quality of the applicant pool? Why would these positions be different from any others?

  9. matt w: Raising somebody’s salary doesn’t make him more skilled. Raising the salary range for a position might enable you to attract more competent people to it, but it is no guarantee. The fact that there are competent people in government doesn’t mean that government compensation should be higher than private compensation for similar people.

  10. I think both of you are wrong: the reason to treat and pay public employees well is so that they will feel good about the job and be loyal to the employer, which is the public.

    Whether you could nickel and dime people down, or get away with paying other people less to do the same work misses the point: if we don’t respect the people who do a job, they will eventually return the favor, or quit. And I think this is true in the private sector as well. What you save by pennypinching, you lose in turnover.

    But if Gen Y wants to live in a low-services and low tax area, that’s fine with me. Just don’t try to do it around where I live! You can keep Texas, thank you very much.

  11. NGC: The problem with telling me to go f*ck myself is that I’m the one who is going to be stuck with the bill attendant to making sure current public employees feel good about their jobs and act loyally to their employers. Under existing contracts, essentially every “public safety” employee that works for a department in the Bay Area for 25 years will retire with a pension well in excess of $120,000/yr, free health care and annual COLAs. The numbers are similar for prison guards. That’s a lot of money going to people that won’t be providing any services to me or my children after they retire. If you and your ilk want to see those existing promises honored and see similar promises made to future employees, you’ll have to convince members of the under thirty set like me to buy into the policy-based underpinnings of your “high-service and high tax” utopia. Keith’s anecdote about a competent civil engineer doesn’t quite get me there.

    Also, the RBC can do better than handwaving to the effect that cuts to public employee compensation represent nothing more than pennypinching. Take a walk through the California budget sometime or the budgets that various counties and cities put online. You will see that employee compensation represents the lion’s share of the money any public body spends. Accept, for the sake of argument, that (1) 70% of the money a given government body spends goes to employee compensation; (2) 30% of this amount goes to public employees that are “overpaid”; and (3) that the “overpaid” people make, on average, 30% “too much”. This works out to more than 6% of a given government’s budget–real money.

  12. Gen Y: you must be new here. No one told you to eff yourself. And I am not part of an “ilk” any more than you are.

    Labor costs are a big part of private sector outfits too. So what? Those people go out and spend that money.

    And I don’t accept your premise. “30% are overpaid.” I very much doubt it. You are using anecdotes too. Why is yours somehow more legit? The only place I might agree with you a little is on health care costs. Medicare for everyone would have really helped with that.

    No one’s forcing you to live in the Bay. Guess what? Compared to the rest of the globe, you *are* living in utopia. But you don’t seem to like it much, so move already — someone else will be happy to have your job and pay your taxes, I feel *quite* confident.

    And if you want to get generational, then go get mad at the Boomers. I might join you in that.

  13. Actually, I’m not sure what “Gen Y” actually means anymore. There was an X, and then I lost track.

    But I *do* agree that young people today are getting the short stick, and it’s not fair.

    It’s not because of public sector employees though, that I know for sure. We’ve had unions and a civil service for kind of a while now. Maybe some of the younger people don’t know that.

  14. IRS agents…the public gets a great return on their salary.
    Same is true with FDA inspectors.

    GenY, you sounds dickish.

  15. Well, he/she could just be in a bad mood. (Usually, that’s me.)

    I got sucked into a similar debate the other day, and I usually regret it afterwards. These debates get too vague. And I think people often confuse the concept of high taxes with a high cost of living. California is not actually a high tax state. Most of the stats that claim to show this are state-plus-local. Gen Y’s problem is, a lot of people want to live in the Bay. It will never be cheap.

  16. @Gen Y: “essentially every “public safety” employee that works for a department in the Bay Area for 25 years will retire with a pension well in excess of $120,000/yr, free health care and annual COLAs.”

    I would be outraged if this were true, but it’s not. I know many law enforcement personnel here in the Bay Area and this isn’t remotely the deal they get. What is true is that there have been some individual ridiculous pension cases, usually with someone hyping up their overtime to get a high final year salary, and those ripoff cases get reported in the press as if they were commonplace. Eliminating such ripoff cases is fine by me, but it isn’t fine by me to pretend that every single law enforcement professional is engaging in such gaming of the system. Don’t forget also that urban cops have shorter life expectancies than people in other professions, they endure a lot of stress and have high rates of cardiovascular and addiction problems — retirement at 50 doesn’t mean they necessarily get more retirement years than a shop clerk who retires at 65.

    @SamChevre: You are the expert on your own situation obviously, so I believe you that these things can happen in the private sector. But if I look at things like a Secretary of Defense whose personal pay is less than one 300,000nth of the defense budget, I think government is the more likely venue where the spread between personal pay and operational budget will be large.

  17. Keith:

    Perhaps this is old news to you or maybe you’ve never really looked into the issue. If the latter, I present to you a database of public employee salaries in the greater Bay Area compiled by the San Jose Mercury News: http://www.mercurynews.com/salaries/bay-area/2010.

    I invite you to pick any jurisdiction (“Entity”), any public safety department (“Dept.”), and any title befitting someone with twenty years of experience (Lieutenant, Sgt., etc.). You will see that the gross pay for almost every person holding such a positions is well above $135,000. There are a handful of exceptions for folks that retire or leave the department mid-year, but the base salary alone is enough to get almost anyone even relatively senior to the $120,000/yr level. You will also see that it is exceedingly rare for someone in public safety to receive less than $15,000 in overtime pay and that $40,000 or more is not uncommon. That, however, is beside the point because it isn’t the case that every single law enforcement professional is gaming the system, instead the system is set up to pay them a hell of a lot of money regardless of whether or not they do cash in a lot of overtime/accrued vacation in their final year.

  18. “Care to argue either (1) that a relevantly large proportion of the people that hold those positions have higher paying options in the private sector; or (2) that there exists a shortage of qualified applicants to replace the ones that are lucky enough to have a better paying alternative outside of government?”

    Why, yes, in a sense, I would. (1.) is just another version of the classic ‘when did you stop beating your wife’ question; and (2.) makes absolutely no sense, but presupposes these jobs do not require a great deal of skill. You could posit these same questions about movie stars, sports celebrities, or investment bankers, or anybody else who you think is getting paid “too much”. Of course all bets are off when it comes to considering coupon clipping parasites.

    Perhaps ms/mr Y could enlighten us as to how (to take just one example) people who sit on the board of public corporations do just about squat beyond seconding whatever the CEO who appointed them tells them to agree with…and for this they get hundreds of thousands of dollars per year and retirement packages that make that obtained by militant policemen and prison guards look pathetic by comparison. You gonna’ tell me there is a shortage of people who could do that?

  19. FuzzyFace: “Raising somebody’s salary doesn’t make him more skilled.” No one said it did. The argument is that lowering someone’s salary might make him less motivated, or (more likely) might cause him to leave the job and be replaced by someone less skilled. Ditto for increasing the amount of work people need to do, which seems to be a popular move.

    “Raising the salary range for a position might enable you to attract more competent people to it, but it is no guarantee.” There are not many guarantees in life, but would you make this argument for private sector employees? Reduce their pay and you won’t get less competent people? Why not?

    By the way, Gen Y seems to have left teachers out of the discussion. They’re targeted in the attack on public employees too; Scott Walker’s union-busting legislation certainly affects them.

  20. Bobbyp: An example that will illustrate one distinction. Two forms of redress are available to a resident of San Jose, California that feels aggreived by what he perceives to be excessive salaries/benefits paid to employees of the various governmental bodies that provide services and have taxing authority within his jurisdiction: trying to lead a taxpayer revolt at the ballot box in order to reduce public employee compensation or, as NGC suggested, he can move somewhere else.

    I think you will agree that political organizing and/or moving out of state are more costly than the forms of redress available to the man that is jealous of the money paid to a movie star, athlete, or corporate titan. In those cases, he can be sure that his wallet won’t be lightened by compensation he views as unjustifiable by simply electing not buy a ticket to the theatre/arena in which the movie/game is playing and can sell all the shares of stock in a corporation that he believes is cheating him out of dividends by paying excessive sums to pliant board members.

  21. matt w: It’s too bad that K-12 teacher pay gets criticized in California. In my view, this is one area where low salaries really do affect the quality of candidates willing to do the job and also contributes to attrition. Based on everything I’ve read, six figure salaries are limited to very senior teachers in wealthy districts and that on the whole teachers make less than half as much as public safety employees–IMHO that’s crazy low. I don’t know anything about the situation in Wisconsin.

    Unfortunately for teachers in California, parents and the state as a whole, I assume pay is going to continue to fall because, over the next three decades, cities and counties are going to have to take increasingly greater amounts from their general funds and pay those amounts to various retirement plans in order to honor promises made to public safety folks (and to a much lesser extent teachers). These contributions will reduce the amount that is available to provide services like education. I don’t think it’s very just to stick my generation with the bill this way, but that’s a jeremiad for another time.

  22. Nice post. As a public schools teacher of at-risk teenagers, I know that there simply is no private sector equivalent of what I do. Most teachers I know do it it – in many cases “put up with it” – not for the money or the opportunity to take the summer off, but for the sense of honor to country (which is essentially what “for the children” means – even if teachers don’t have to face off with thugs (most of the time), enter burning buildings, or brave enemy lines, we do have to give hugs, build relationships, provide emotional grounding to large groups of people for hours at a time, believe in people when no one else will, and pretend one student at a time that nothing matters more in the world than correcting that last sentence – every second of it depends on knowing deep down that we are making a difference.)

    So, you could match my education, maybe some vague scope of what I do on a daily basis, but not the population I do it for, and not the “why” of what I do. Maybe I deserve less. Honestly, I don’t know how to put a price on what I do – it certainly varies by state. The nature of the job varies by population. But if you fundamentally value what public sector employees do, then you pay them accordingly. Go out and find a retired teacher and see if they’re living high on the hog, after spending their career fighting “for their country”, as it were. Health care, a modest car, a night out here and there, a comfortable house with a spare room for the grand-kids when they visit. Seems fair to me.

  23. ms/mr Y. How much are you willing to pay for public safety? Apparently you feel you pay “too much” in absolute terms (a marxist assertion, nice!). I am willing to begrudge a policeman a good comfortable reumuneration, you apparently are not. But the nub is this, we have a system, backed by the power of the state, that enables some to basically collect economic rents (movie studios, sports franchise owners, and investment banks)that enables them to garner outsized economic rewards. This, in turn, enables movie stars, top athletes, and ‘that guy’s’ nephew who went to Yale on a legacy, to cash in accordingly. That such a system is deemed to be, in any sense desirable, is the real injustice.

    Try looking at it another way. Most people are paid too little.

  24. I’m not so sure it’s that easy to get out of subsidizing corporate execs, unless you’re willing to entirely forgo the stock market. I don’t think most shareholders have much power at all, which seemed funny to me when I figured it out. All that fancy-pants talk about “free markets,” and yet this one seems rigged. I think most of the corporations do the same thing, so where would a rebel go?

    You know who does have power? Pension funds. So take that.

    Anyhoo, the people who bollocked up the nation’s finances were *not* the union employees. It was the two needless wars and some massive unnecessary tax cuts. Go ask Ezra Klein if you don’t believe me.

  25. ” … urban cops have shorter life expectancies than people in other professions, they endure a lot of stress and have high rates of cardiovascular and addiction problems — retirement at 50 doesn’t mean they necessarily get more retirement years than a shop clerk who retires at 65.”

    Professor Humphreys, if that was ever true, it hasn’t been for some time. Check CalPERS’ actuarials sometime. They’re posted online.

  26. Gen Y: You said “essentially every public safety employee who worked 25 years retires at at least 120k”, the data you present don’t support that. Where I live, a police officer can retire at age 50 after having worked 25 years…that gives them 75% of their base salary, so unless essentially every officer’s base salary was $160,000 which the table shows is not the case they don’t get 120k in retirement (Also in my community, the police are being asked by the city to take a 10% pay cut and 25% health benefit cut).

    Bruce: I can’t substantiate my claim about police life expectancy. Thanks for the info and consider me chastened.

  27. Generation Y says:

    “NGC: The problem with telling me to go f*ck myself is that I’m the one who is going to be stuck with the bill attendant to making sure current public employees feel good about their jobs and act loyally to their employers. ”

    Perhaps you should look around what happened for the last decade where the right told you the crap that you’re spouting, while actually f*cking you over.

  28. The claim that every public safety employee with 20 years experience is in the upper ranks is also, um, questionable. Sure, some people move up, but the nice thing about the government-job wage structure is that people aren’t compelled to seek higher rank to attain a living wage. And that means you actually get competent, experienced people working line positions.

  29. The thing that pisses me off is the gaming of base salary in order to increase retirement benefits. Pumping up one’s salary in the last 5 years with increased overtime, etc should not be allowed IMO. but management agreed to this so they are partially to blame. nobody should make promises that cannot be kept. once again the accountants (among others) have let us down.

    But the nightmare scenarios painted by some (retirement benefits paid to government workers will overwhelm the system) will not come to pass, again IMO. when there is not enough money to cover essential services, the benefits will be cut. everyone needs to realize that and plan accordingly. ya can’t get blood from a turnip and ultimately providing services to essentially everybody will trump paying ridiculous retirement benefits. and by “ultimately” and “trump”, i mean that “essentially everybody” will have more pitchforks than the government retirees getting the ridiculous benefits. let’s hope it doesn’t come to that.

  30. Professor Humphreys,

    Thanks for the info? Thanks for the info?!?!

    You’re doing it wrong, Doc. Next time try doubling down on wrong and accusing me of hating the working man.

    Don’t worry, a little more practice and you’ll get the Internet-argument protocols down pat.

  31. Bruce Ross — : ) So, you have good humor to go with your brains…a rare combination — please keep the comments coming.

  32. Gen Y: I’m glad we agree on teachers. In fact we have news today that Wisconsin’s anti-union law has led to a record number of teacher retirements. Now, it’s possible that Wisconsin schools will be as good after losing many of the most experienced teachers, but it doesn’t seem likely.

    If you look at the public sphere outside the Bay Area, you’ll find an extremely broad-brush attack on public employees and their unions. That’s the problem. On a case-by-case basis there probably are unions worthy of criticism — I haven’t heard anything good about the California prison guards’ union — but the attack on public employees as such is certainly doing much more harm than good.

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