Oklahoma State-Employee Pay
Better than Private Sector
By Wendell Cox
Op-ed in the Oklahoman
April 4, 2001

In February several hundred Oklahoma public employees, believing they are underpaid in comparison with their peers in other states and in comparison with the competitive market, descended upon the state Capitol demanding better wages and benefits.

"It's time to let the public know about us," said Gary Jones, head of the public employees' union.

Good idea. In a recent study from the Oklahoma Council of Public Affairs (www.ocpathink.org), we have discovered that state employees are in fact much better paid than the average Oklahoman who pays their salaries, and are considerably better paid than market rates.

The Office of State Finance recently announced adjustments to national reporting that now estimate average state-employee salaries rank 37th in the nation. Our research shows Oklahoma state employees are paid approximately 2.9 percent more than their counterparts in six nearby states with similar per capita income (Louisiana and all contiguous states except Colorado).

Oklahoma state employees are paid considerably more than private employees in the state. While average salaries are similar (state employees are paid 1.1 percent more), state employer-paid benefits add 46 percent to the compensation bill, compared to only 21 percent in the private sector. The result is that total compensation for state employees is 22 percent higher than that of the average private employee working a full-time equivalency.

But there is more. The best readily available indicator of employee compensation per unit of output is compensation per hour worked. The average state employee works 139 fewer hours (3.5 weeks) annually than the average private employee in Oklahoma. This expands the gap between state and private compensation. The result is that state employees are compensated in salaries and benefits 31.4 percent more than private employees per hour worked.

Further, over the last 20 years, Oklahoma state employees have received an average wage and salary increase of 9.1 percent, adjusted for inflation. This compares to a 12.1 percent decline among Oklahoma private employees.

To analyze comparable employees, an "equivalent employee" analysis was performed. This involved comparing the compensation over time of state and private employees hired at the same time at the same salary (the average state salary). The much higher state employer-paid benefit rate and higher rate of annual increase telescopes into much higher compensation for the state employee.

On a compensation-per-hour- worked basis, the state employee has a 58.8 percent advantage over the equivalent private employee hired at the same wage rate over a 40-year career. In monetary terms, this represents an advantage of $693,000. For the average-tenure state employee (average length of service is 10.8 years), the cumulative advantage is 36 percent, for a cumulative monetary value of nearly $125,000.

And there is still more. The above-market advantage of Oklahoma state employees is made even greater by the superior employment security that is inherent in public employment. Private employees are four times as likely to lose their jobs than state government employees. The superior security of state employees represents a very real monetary advantage. Based upon involuntary separation rates and compensation rates for subsequently obtained jobs, it is estimated that state employment represents a 7.9 percent monetary advantage over a 40-year career. When combined with the state- employee advantage over the equivalent private employee described above, the state- employee advantage would expand by $13,000 for an average tenure employee and $148,000 over a 40-year career.

Supporting the findings that state employees are paid well above market compensation is the fact that average state- employee tenure is much higher than the national average. Generally, state employees exhibit an average tenure (length of employment) of three times the national average for all employees. Furthermore, in 2000 there were more than 17 employment applications for each position filled. The ratio was even higher in Oklahoma County, where private-sector job opportunities are the greatest. These factors indicate that the market perceives Oklahoma state employment to be very desirable indeed. If the state were paying less than market, then the market would not be so eager to be employed by the state.

In sum, the data is clear. Oklahoma state employees are much better paid than the average Oklahoman from whom the money is taken, and are considerably better paid than market rates.

If there is a crisis in Oklahoma state employment, it is that employee compensation is above market, not below.

Cox, former director of public policy at the American Legislative Exchange Council, is principal of Wendell Cox Consultancy, an international public policy firm. This article was written for the Oklahoma Council of Public Affairs.

(c) 2001 www.publicpurpose.com --- Wendell Cox Consultancy --- Permission granted to use with attribution.
The Public Purpose
Demographic Briefs
Government Cost Review
Gov't Employment Fact Book
Highway & Motorway Fact Book
Intercity Transport Fact Book
Labor Market Reporter
School Transport Fact Book
Transport Fact Book
Urban Policy
Urban Transport Fact Book
Competitive Tendering Website
Intl Comp. & Ownership Conference
Alternatives to Light Rail in Seattle

Contact by E-Mail
Subscribe (Free)
Corrections Policy & Rights

The Public Purpose
P. O. Box 841 - Belleville, IL 62269 USA
Telephone: +1.618.632.8507 - Facsimile: +1.810.821.8134
Demographics, Development Impacts,
Market Research & Urban Policy