The Gap Between Private and Public Sector Workers Can’t Keep Growing Forever


From the New York Times:

President Obama plans to sign an executive order requiring that janitors, construction workers and others working for federal contractors be paid at least $10.10 an hour, using his own power to enact a more limited version of a policy that he has yet to push through Congress.

I wonder how this plays out politically? On the one hand, public support for a higher minimum wage is very broad. On the other hand, this reinforces the widening gap between private sector workers and those who are paid (directly or indirectly) by taxpayer dollars. One side watches its wages stagnate and its standard of living drop, while its taxes are used to fund ever higher wages for the lucky few working for the government.

It’s not clear how this is going to play out on the broader political stage. There’s already been a backlash against unionized state and local workers, who have seen their wages and pensions increase during the recession, while the taxpayers who fund them have seen their wages drop significantly during the same period. But how does this story end? With voters rebelling against higher wages for government workers? Or with voters rebelling against the miserly wages of the private sector? I don’t know. But at some point, something’s got to give.

UPDATE: I didn’t get into the comp details in this post, so let me just add a little bit here. My read of the evidence is that, as of a few years ago, government workers at low and mid-range pay levels were generally (but not universally) better compensated than similar private sector workers. The gap was small, but real, and over the past several years it’s almost certainly increased.

The story is different at higher wage levels. Executives, doctors, lawyers, scientists, and so forth are paid quite a bit better in the private sector than they are in government jobs.

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