Rhode Island’s Government Payroll: Living Beyond Our Means

When a family comes to a decision about purchasing any product or service, it doesn’t merely accept the seller’s sense of what’s reasonable. In addition to the market rate, consumers must take into account the quality of the thing they’re buying as well as their own ability to afford it.
With deteriorating infrastructure, doubts about the quality of government services, and the high-profile specter of unfunded municipal and state retirement liabilities looming over the state during this current period of economic stagnation, the compensation of public-sector employees has become a subject of heated debate about fairness and affordability.
A study that I’ve just produced for the RI Center for Freedom & Prosperity shines a stark light on the comparison of the public sector in Rhode Island to the private sector that supports it financially. Using a refined methodology for collecting data, economists William Even, of Miami University, and David Macpherson, of Trinity University, find that state and local government employees here enjoy a 26.5% “premium” in total compensation over their private-sector neighbors — even after controlling for variables like education, experience, and broad job category. That compares with 18.8% for New England and 14.9% for the United States as a whole.
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Russ
Russ
9 years ago

“local government employees here enjoy a 26.5% ‘premium’ in total compensation over their private-sector neighbors — even after controlling for variables like education, experience, and broad job category.”
And not controlling for cost of living? What a shock, Justin. It’s more expensive to live in the Northeast than it is to live in the rural parts of the country. Comparisons to New England fall flat for the same reason. We’d be more appropriately compared against metro areas like Boston or Hartford than against averages including rural parts of Maine.

Justin Katz
Justin Katz(@justin)
9 years ago

Russ, I don’t even know how to respond to somebody who quotes a sentence and then comments on it as if he hasn’t even read it.

Monique
Monique(@monique-chartier)
Editor
9 years ago

Great analysis by the RICFP. Good to get the numbers on the table.
So perhaps the few recent attempts at privatization (though too narrow in scope and possibly too late) by Pawtucket and NK are well advised, after all.

Justin Katz
Justin Katz(@justin)
9 years ago

Monique,
The fascinating reality revealed in the study, which honestly changed some of my underlying assumptions as I worked on the paper, is that privatizing is an especially attractive option in Rhode Island, because our private sector is so far below where it ought to be for our location and cost of living (as judged against MA and CT).
Arguably, both sides of the government-unionization dispute have been fighting the wrong battle in Rhode Island. What if the best way for the union folks to reduce the pressure to privatize were to back free-market reforms that made the private-sector so successful that private contractors wouldn’t underbid the unions (so to speak) so much for government work?

Dan
Dan
9 years ago

Progressives such as Russ have a carbon-copy skeptic response to anything negative about Rhode Island, waving away all unfavorable statistics and studies on “population density” as a blanket excuse of convenience for their failed economic policies. They do this while simultaneously blaming all the state’s chronic problems on “conservative Democrats” and the former Republican governor, accepting any statistic or bare assertion in furtherance of that narrative without any hesitation or adverse comment.
“Samuel Bell” has a long narrative series up on RIFuture about how all Rhode Island’s problems are due what he calls “severe austerity” (not one dollar of public spending has been cut), and the state’s supposedly conservative politicians (hold the laughter please). One of these articles is entitled “The Carcieri Effect” and contains such outrageous and academically laughable assertions as: “A cursory glance at the unemployment rate graph points to a likely culprit. What is perhaps most striking about Rhode Island’s decline is just how closely it corresponds with the tenure of Donald Carcieri.” I don’t see any of Russ’s smart remarks and criticisms in the comments section of any of these pathetic “articles” on the progressive blog he frequents.

Russ
Russ
9 years ago

“Russ, I don’t even know how to respond to somebody who quotes a sentence and then comments on it as if he hasn’t even read it.”
Well you could answer the question… did the analysis control for cost of living? If so, how was that normalized? There’s no rule you have to control for every variable and your statement clearly omits the significant factor of regional variations in things like housing costs.

Russ
Russ
9 years ago

“…not one dollar of public spending has been cut”
Aid to cities and towns was disasterously cut as was funding for the Slater Technology Fund. Both dumb moves.

Russ
Russ
9 years ago

Ah, never mind. Read that too quickly.

Justin Katz
Justin Katz(@justin)
9 years ago

Russ,
The premium is of RI public sector over the RI private sector. They live in the same place.

Monique
Monique(@monique-chartier)
Editor
9 years ago

“while simultaneously blaming all the state’s chronic problems on “conservative Democrats” and the former Republican governor”
… neither of whom have held any substantial power in this state.

helen
helen
9 years ago

I want to tell you a little story that I believe reflects on the attitudes that have gotten us in our state into this situation.
Many years ago I was working in a jewelry factory for minimum wage. I was suffering very much because that minimum wage was all I had to completely support myself and I had no family or other resources to fall back on.
One day as I was laboriously doing the painful manual labor and suffering hunger pains because I couldn’t afford enough food on my wages,also feeling extreme pain and having blistered hands while being exhorted by my boss to hurry up and go faster(as if I could),I overheard a conversation.
This conversation was between one of the big bosses,possibly one of the owners and a visitor to the factory,who the boss was showing around.
As they passed by me,I heard the boss say to the visitor that these women working here were just working for pin money.
This job was all that was keeping me alive(barely) and this moron,this cold,stupid creep was saying that I was working just to get “pin money”.
That is one of the attitudes that is wrong in this state.

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