Mike the Mad Biologist

Regarding their op-ed page, The New York Times seems eager to provide misinformation via Thomas Friedman columns. It’s a fascinating business model. Besides, being lectured by Tom “Suck on This” Friedman completely blows up the irony meter. His latest inane–and factually incorrect–burbling:

Let’s kowtow even more to public service unions so they’ll make even more money than private sector workers, so they’ll give even more money to Democrats who will give them even more generous pensions, so not only California and New York will go bankrupt but every other state too.

Then, of course, there’s the reality (italics mine):

If we adjust for education and experience then we find that public sector workers get paid somewhat less on average than private sector workers. This is partially, but not completely, offset by the higher pensions that upset Brooks [and Friedman] so much.

It is likely the case that many state and local governments did not adequately budget for workers’ pensions, but this is more an issue of failed accounting and incompetent reporting (newspapers are supposed to be covering such issues) than excessive pensions. Brooks highlights an estimate that the amount of the average unfunded pension for all public sector workers is $87,000.

This does not seem particularly large. If we assume an average retirement of 20 years, this comes to $4,350 per worker pension year. Since many public sector workers do not have Social Security this hardly seems an excessive amount on the workers’ part.

For the wonky version (pdf):

A standard earnings equation produced a surprising result: full-time state and local employees are undercompensated by 6%. We observed, however, that public employees work fewer hours, particularly, employees with bachelor’s, master’s, and professional degrees. A re-estimated earnings equation controlling for work hours of full-time employees demonstrates that there remains a significant penalty of 3.7% in total compensation for full-time state and local employees when compared to similar private-sector employees.

Only workers with a high-school education do better in the public sector–and that’s because private sector wages for high-school graduates have collapsed. Regarding the pension issue, municipalities and states decided to cut taxes and hope that the ahistorically high rates of return in the stock market would save them (paging Boston’s Mayor Menino, paging Mayor Menino….). That’s not the workers’ fault, but the fault of elected officials and their constituents.

In short, The New York Times devoted space for someone to make claims that are factually untrue. This is not helping.

Comments

#1 Moopheus
October 28, 2010

“Regarding their op-ed page, The New York Times seems eager to provide misinformation”

That’s about all you needed to say, really. Arguably not restricted to the op-ed pages, either.
#2 Dunc
October 28, 2010

This is not helping.

Oh, it’s helping them just fine, thanks. Why do you imagine they employ Friedman in the first place?
#3 Stephanie Z
October 28, 2010

There’s also the fact that private-sector pensions have been managed only marginally better, and only because of recent legislation that required them to fund their plans to make up for the stock market losses that both kinds of plans have suffered in the past couple of years. The big difference is that governments have been so busy cutting their revenue streams that they haven’t been in a position to make up the losses.
#4 Lyle
October 28, 2010

The logic runs as follows: The unions influence the election so the politicians tend to be more open to the unions point of view than than private management. However for upper management of companies its the same situation only worse. In both cases the employees have a significant influence over their own comp, although in the public employee case less than the upper management case. In the upper management case you convince the comp committee of the board that you are the best thing since sliced bread and since all comp committees are convinced that their management grew up in Lake Wobegon (all the children are above average) they pay them accordingly.
#5 Matt Raft
October 28, 2010

1. In the study you cite, please tell me how much money or value the researchers assigned to the much higher job security of public sector workers, who are usually not at-will.

2. Please name 10 major corporations that have long term, unpredictable debts owing and payable to non-working employees. Within these 10 major corporations, how many of them are able to shift 100% of the debts to the taxpayer? (Note: major banks do not count because 1) the debts aren’t owed to non-working employees; and 2) unlike gov employees, banks must pay back all taxpayer monies, i.e., the taxpayer provided a loan, not a grant that causes higher taxes.)

3. You seem to gloss over the additional compensation provided to government employees in the form of pensions. Do you know what percentage of private sector workers under the age of 55 receive pensions? If so, please list the percentages of under-55 gov workers and private sector workers who are eligible for pensions.

Bonus: did the study provide any additional weight to the gov worker’s guaranteed pension vs. a private sector worker’s non-guaranteed 401k? If not, do you believe a retirement guarantee is worthless?

4. In the private sector, how many entities are able to pass along their higher costs and COLA to taxpayers instead of cutting spending, jobs, or salaries?

5. Let’s assume that gov workers, on average, have higher levels of education than the general population. Outside of universities and university-backed research labs, what useful inventions have government workers provided to the general public vs. private sector workers with similar education levels, such as those who work for Google, eBay, GM, Intel, etc.?
#6 Jake
October 28, 2010

You ask – “In the private sector, how many entities are able to pass along their higher costs and COLA to taxpayers instead of cutting spending, jobs, or salaries?”

Change “taxpayers” to “customers”. Private entities may not be able to pass their expenses onto taxpayers, but they sure can pass it along to customers. It helps to hide it in the form of “service fees”.

Regarding your last question, I don’t see how you can justify excluding universities and university-affiliated labs. Most university researchers are funded primarily from federal agencies (NSF, NIH, DOE, etc) in addition to being state employees. That’s double public employment. Additionally, you forgot to exclude federally-funded national labs from your list. A few innovations come to mind immediately, most notably atomic weapons. Let’s also not forget all of the technology to come from military research, like the global positioning system and digital photography. Oh, and the internet.
#7 Matt Raft
October 29, 2010

So you can’t see the difference between a customer who voluntarily buys products from a business and a taxpayer who must pay taxes under threat of imprisonment?

Also, a business cannot pass on costs to a customer’s grandchildren. Government entities can. Besides, if businesses take on too much debt, generally speaking, their creditors suffer, not the public or anyone’s grandchildren. (With businesses, the real problems are unregulated leverage and “too big to fail,” both of which can and should be fixed.)

I agree that government researchers have done many good things for the general public. As a percentage of overall government workers, however, they are very small. In short, they are the exception, and most reasonable people do not rely on exceptions to make their case.
#8 Sally Strange
October 29, 2010

“Also, a business cannot pass on costs to a customer’s grandchildren.”

Residents of the Gulf Coast might take issue with that.
#9 Troublesome Frog
October 29, 2010

Let me see if I can take a crack at this…

1) Very true.
2) What is an “unpredictable, long-term debt owing and payable to non-working employees?” I thought you meant “pension” but you cover pensions in (3).
3) I suspect that defined benefit plans are going the way of the dinosaur for everybody fairly soon, just like they did in the private industry. There are still plenty of people who are sucking down private pensions, which should tell you that the pension problem is not exactly one that private industry solved a long time ago.
4) Taxpayers are customers. If the price of a program gets too high, taxpayers can complain and have the program cut.
5) Why in the world are you assuming that education is for “inventing” things? Given that private industry employs most of the country’s engineers and you’ve decided to exclude publicly funded research scientists, you’re basically left with the (majority) part of the educated workforce that doesn’t do inventions. How many patents does the typical financial analyst at Ernst & Young have?

And of course, I must roll my eyes:

So you can’t see the difference between a customer who voluntarily buys products from a business and a taxpayer who must pay taxes under threat of imprisonment?

The same people who pay taxes under threat of imprisonment get to vote on the issues and leaders every couple of years. If the price of those services gets too high, the customers are welcome to change it.
#10 Matt Raft
October 29, 2010

@Troublesome Frog:

“Unpredictable, long-term debt owing and payable to non-working employees” are the costs of lifetime medical benefits as well as pensions.

You say, “Taxpayers are customers. If the price of a program gets too high, taxpayers can complain and have the program cut.” Except that we cannot usually vote to cut specific programs. We vote in a political party, and we expect the party to cut wasteful programs; however, in the last ten years, both parties have been increasing spending. Absent some miracle, increasing spending means higher taxes in the future. If a poorly run business attempted to pass along higher costs, we can choose to go to another business. But if the government is poorly run, we and our children are hostage to its decisions. We ought to hold our government accountable when it prints money to balance the budget, but this doesn’t work when both parties spend like drunken sailors.

You say, “The same people who pay taxes under threat of imprisonment get to vote on the issues and leaders every couple of years. If the price of those services gets too high, the customers are welcome to change it.” See above. If voters are against inflation and want to cut spending across the board, it doesn’t seem to matter which major political party they choose. Do you now understand why the Tea Party has gained so much strength, warts and all?
#11 Troublesome Frog
October 29, 2010

Matt Raft:

Except that we cannot usually vote to cut specific programs. We vote in a political party, and we expect the party to cut wasteful programs; however, in the last ten years, both parties have been increasing spending. Absent some miracle, increasing spending means higher taxes in the future.

I’m a Microsoft customer. I disapprove of plenty of things that they do, and I’m pretty much stuck with Microsoft for business reasons. I’m not a large enough portion of their business for my dollar vote to make a difference. I pretty much have to deal with it. That’s how it is when your views aren’t shared by enough people to make a difference in any arena.

If voters are against inflation and want to cut spending across the board, it doesn’t seem to matter which major political party they choose. Do you now understand why the Tea Party has gained so much strength, warts and all?

My understanding of the Tea Party is slightly different than yours. I see it as being made up of three components:

1) Republicans who are really mad that their guy is not in charge anymore.
2) Lunatics and others who simply don’t understand how government budgeting works. These would be the “Keep the government out of my Medicare” types or the, “We need to get rid of Social Security and Medicare just as soon as I’ve collected my last check” types.
3) People who actually understand the system and are willing to eliminate things like SS, Medicare, and other major services for principled reasons.

The fact that the Tea Parties started as soon as Obama appeared on the scene before any appreciable changes in policy tells me that the group is basically (1) with a bunch of (2) along for the ride. That seems to me to be the most obvious reason why the Tea Party has gained so much strength. If McCain/Palin had won and pursued exactly the same set of policies, I seriously doubt that the Tea Party would exist.

I’m happy that the minority in (3) have found a place to vent spleen, but that’s not going to last. Surely they have to have noticed that the handful of candidates they’ve managed to get onto the ballot are mostly crazies from group (2) and not their group (3) brethren.
#12 Troublesome Frog
October 29, 2010

Matt Raft:

BTW, if the blog linked in your URL is yours, I have to congratulate you on your signal to noise ratio. The discussion there is pretty darned solid on both sides and seems to be completely devoid of crazy people. Well done.