State-employee pay study must consider employment levels, job security
August 19, 2013
On June 5, Oklahoma’s Office of Management and Enterprise Services (OMES) announced “a comprehensive state-employee compensation study to determine appropriate compensation levels for an estimated 33,000 state employees.” According to a press release, the study will be conducted “with the assistance of national consultants and a working group comprised of officials from the governor’s office, Legislature, state agencies, and Oklahoma Public Employees Association.” Key components of the study are as follows:
- Development of a statewide employee-compensation philosophy.
- An extensive data-driven review of current compensation levels.
- A comparison of current compensation levels to other public and private-sector market levels.
- Recommendations for appropriate pay and benefits packages.
OMES should be applauded for undertaking this study, and state Rep. Leslie Osborn (R-Mustang) should be applauded for leading an interim study that will begin to shape legislation for 2014. But for this study to be truly “comprehensive,” policymakers studying compensation levels must do so in the context of two other important factors: (1) employment levels, and (2) public-sector job security and protections.
First, employment levels. Oklahoma has a spending problem: Total state spending is already at an all-time high, and as OCPA president Michael Carnuccio reminds us, for the third budget cycle in a row Republican control of state government has produced even higher government spending and no immediate tax cuts for the Oklahomans. This spending problem is, in part, a bureaucratic-overhead problem.
According to the latest edition of Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, Oklahoma ranks a disappointing 34th out of the 50 states in full-time-equivalent (FTE) public employees as a percent of the population. Oklahoma should aspire to the #1 spot, which is the state with the fewest public employees as a percent of the population. Other researchers — from Rex Pjesky (“Excess State Employees Harm Oklahoma’s Economy”) to Chris Edwards (“Oklahoma’s Bureaucracy Among the Nation’s Largest”) to Russell Jones (“Oklahoma’s Bureaucratic-Overhead Problem Persists”) to the research affiliate of The State Chamber (“Table 10: State and Local Government Employment”) – have long pointed to this problem.
According to The State Chamber, “While Oklahoma’s ranking of the number of FTEs/1,000 residents places us 14th in the nation, the annual payroll per FTE ranks 45th.” Precisely. And we would suggest there’s a connection there. It makes little sense for lawmakers to examine compensation levels without also examining employment levels.
Next, policymakers should consult the empirical literature on the public-sector “job security premium.” A number of advocates for public-employee pay raises compare the salary of public-sector jobs to that of private-sector jobs without considering the job security and various protections associated with government employment. For example, a transportation job protected by the union-styled merit system for state employees is far different from a transportation job at a private-sector company where private employees can be hired and fired at will for poor performance or for efficiency reasons determined by the private company.
Does Oklahoma have too many government employees? Do public-sector jobs have greater security than private-sector jobs? We hope the OMES study and the subsequent interim study will give Oklahoma’s taxpayers some answers.