Largely thanks to tax reform and a federal deregulatory drive, economic growth is alive and well across North Carolina. Unemployment remains at decadal lows and wages are growing at decadal highs. But even with higher earnings, workers are right to ask what their hard-earned tax dollars are being spent on at the state and local level.
Unfortunately, more and more dollars go toward padding the pockets of overcompensated public servants, further increasing the gap between private and public pay. By leveling the playing field between bureaucrats and private-sector workers, lawmakers in Raleigh can send a clear message to taxpayers that the system is not stacked against them.
Bureau of Labor Statistics economists Maury Gittleman and Brooks Pierce found in 2012 that, “controlling for skill differences and incorporating employer costs for benefits packages, ... public sector workers in state government have compensation costs 3–10 percent greater than those for workers in the private sector, while in local government the gap is 10–19 percent.”
A look at compensation data provided by the N.C. government confirms that pay is unreasonably high for public workers. Around 90 percent of research assistants employed by the state, for instance, make more than $40,000 a year. Clearly, the state's pay schedule makes it possible for research assistants on the public dole to clear $50,000 with a couple of years of experience. In contrast, the average salary for research assistants statewide is $40,000.
This (crude) comparison, of course, leaves out generous insurance and pension benefits for state employees. Workers employed by the state government enjoy a defined benefit pension plan, along with a generous Preferred Provider Organization health-care plans. Proposed reforms to replace guaranteed pensions with 401(k) contribution plans failed last year in the legislature. Contrast this to the private sector, where guaranteed pensions have largely gone the way of the dodo.
Then of course there are the high-ranking bureaucrats. According to Brian Darling in a Townhall op-ed, “Dr. Mandy Cohen, secretary of the [North Carolina] Department of Health and Human Services, saw her salary rise by more than $50,000 in her first year on the job, including a $17,500 raise in January 2018 and she now makes $192,500 a year.”
But comparing state government and private-sector compensation assumes that public jobs have private counterparts. While some public roles belong exclusively in the public domain other positions are unnecessary and have little upside for state citizens. Take, for instance, the armada of 18 “cosmetic arts supervisors” hired by North Carolina. Research shows that health and environmental standards for manicurists and hair stylists simply prop up establish players at the expense of upstart competitors. And when competition suffers, so does quality. Despite little to no demonstrable public health benefit to these regulations, the state continues to train and hire employees to inspect cosmetics enterprises.
We're not saying there isn’t a useful role for the public sector. North Carolina has created a superb higher education system with taxpayer dollars, and boasts some of the best roads. But elected officials have created a system where public servants are systematically compensated at higher rates than their private-sector counterparts, taking into account job role, experience and education.
In addition to bilking taxpayers for millions of dollars in unnecessary expenses, this system attracts talent away from the private sector. And, in a public sector environment where bad performance is rarely punished, this talent all but goes to waste.
By limiting pension benefits for new hires and conducting a systematic review of pay practices, lawmakers in Raleigh can rebalance the system in a way that works for taxpayers.