public sector

Perkins And The Benefits Of Collaboration

Our guest author today is Stan Litow, a professor of Public Policy at both Duke and Columbia University. He is a former deputy chancellor of schools in New York City, former president of the IBM Foundation, a trustee of the State University of New York, and a member of the Albert Shanker Institute’s board of directors. His book, The Challenge for Business and Society: From Risk to Reward, was published this year.

This July, the U.S. Senate and House of Representatives, after a dozen years of inaction, unanimously passed legislation to update the Federal Career and Technical Education law. By doing so, Congress increased funding for Career and Technical Education to nearly $1.3 billion in the coming year. The law is called the Perkins Act, named after a former member of Congress. It can go a long way toward addressing America’s skills crisis and providing many of our young people with real economic opportunity. Given the contentious Washington climate, broad bipartisan support for Perkins—including strong private sector, labor union and education backing—is truly noteworthy. But as we consider how this happened, it brings to mind another action that took place more than 80 years ago involving another Perkins: Frances Perkins.

On the 25th anniversary of Social Security, Frances Perkins, America's first cabinet member to be a woman, said "It would not have happened without IBM." Many who saw her on film were surprised. President Roosevelt was usually critical of the private sector. What had IBM to do with Social Security? Actually a lot. After the bill to establish Social Security was signed, the Labor Department under Perkins had to implement it. She sought outside help to design an implementation plan, yet everyone she approached said it would take years. When she approached Tom Watson Sr., IBM's CEO, she got a different answer. His team of engineers told him it might be possible to implement it sooner, but it would require the investment of several million dollars (about a hundred million in today’s dollars) to create what they called a "collator."

A Myth Grows In The Garden State

New Jersey Governor Chris Christie’s recently announced a new "fairness funding" plan to provide every school district in his state roughly the same amount of per-pupil state funding. This would represent a huge change from the current system, in which more state funds are allocated to the districts that serve a larger proportion of economically disadvantaged students. Thus, the Christie proposal would result in an increase in state funding for middle class and affluent districts, and a substantial decrease in money for poorer districts. According to the Governor, the change would reduce the property tax burden on many districts by replacing some of their revenue with state money.

This is a very bad idea. For one thing, NJ state funding of education is already about 7-8 percent lower than it was in 2008 (Leachman et al. 2015). And this plan would, most likely, cut revenue in the state’s poorest districts by dramatic amounts, absent an implausible increase in property tax rates. It is perfectly reasonable to have a discussion about how education money is spent and allocated, and/or about tax structure. But it is difficult to grasp how serious people could actually conceive of this particular idea. And it’s actually a perfect example of how dangerous it is when huge complicated bodies of empirical evidence are boiled down to talking points (and this happens on all “sides” of the education debate).

Pu simply, Governor Christie believes that “money doesn’t matter” in education. He and his advisors have been told that how much you spend on schools has little real impact on results. This is also a talking point that, in many respects, coincides with an ideological framework of skepticism toward government and government spending, which Christie shares.

Basic Facts About Who Pays State And Local Taxes

Taxes, particularly income taxes, are among the most divisive and controversial issues in any nation, and this makes perfect sense – people care about how much they pay and how it is spent. Yet most of the constant, heated debate about taxation focuses almost entirely on federal taxes, with state and local taxes receiving far less attention.

Periodically, the Institute on Taxation and Economic Policy (ITEP) releases an important and interesting analysis of who pays state and local taxes – that is, the tax burdens among households with different incomes. The latest version of this report was published last year. The findings are worth knowing for anyone interested in public sector services, including education.

ITEP reports that state and local taxes overall are highly regressive, which means that poorer households pay a larger share of their income in state and local taxes than do higher income households. This finding is summarized in the figure below, which is taken directly from the report (note that these are national averages, and that the breakdown varies by state).

The Civic Power Of Unions And The Anti-Union Political Agenda

This is the second of two posts on the political dimensions of the Friedrichs case. The first post can be read here.

Before Justice Scalia’s sudden death, it appeared that, through the Friedrichs case, the Supreme Court’s conservative majority would succeed in imposing “right to work” status on public sector working people across the nation. As discussed in a previous post, there were signs that this conservative bloc was looking to deliver its decision in time to sideline the four largest public employee unions – the American Federation of State, County and Municipal Employees (AFSCME), the American Federation of Teachers (AFT), the National Education Association (NEA) and the Service Employees International Union (SEIU) – from the 2016 elections. Not coincidentally, these are also the unions that have the strongest political operations in the American labor. If Scalia had not died and these intentions were realized, what would have been the impact on the 2016 election and beyond?

To grasp the full impact of a negative Friedrichs decision, had the conservative justices been successful in their plans, it is necessary to gauge the effect that public employee unions have on the political activism of their members. Ironically, insight into this question can be gleaned from an essay that exhibits a critical attitude toward public sector unions and collective bargaining, Patrick Flavin’s and Michael Hartney’s “When Government Subsidizes Its Own: Collective Bargaining Laws as Agents of Political Mobilization.”1 (Hereafter, F&H.) While not without analytical flaws, a number of which will be discussed below, F&H contributes to the literature with a new way of measuring the effect of teacher unions on teacher political activism and engagement, above and beyond voting. (Teachers have always voted at consistently high rates, with over 90 percent turnout in presidential elections and over 80 percent in mid-term elections.) Consequently, F&H places in relief the union contribution to member political activism that was targeted by the SCOTUS conservatives.

Is There A Pension Crisis?

Our guest author today is David Cay Johnston, a distinguished visiting lecturer at the Syracuse University College of Law and a former Pulitzer prize-winning financial reporter at The New York Times. This article is adapted from his remarks to an ASI-sponsored conversation on the topic in March, which also included remarks from Chad Aldeman, Teresa Ghilarducci, and Dan Pedrotty. A video of this event can be found here.

So the question is whether there is a pension crisis. The answer is yes, absolutely. It’s just not the one that politicians always talk about.

Contrary to that you hear about on TV, in market economics, defined benefit pensions are the second most efficient way to provide for income in old age. The most effective way would be a national program that spreads risks to everyone. The least efficient way to do it is through defined contribution plans.

There is abundant evidence for this. Defined contribution plans work very well, but only as supplements for prosperous people such as me and my wife, who is a public charity CEO, they are not at all effective for most people. That’s be because defined contribution plans violate specialization, one of the most basic tenets of market economics as taught to us by Adam Smith, the man who first explained market economics.

Why We Defend The Public Square

The following are the texts of the two speeches from the opening session of our recent two-day conference, “In Defense of the Public Square,” which was held on May 1-2 at Georgetown University in Washington, D.C. The introduction was delivered by Leo Casey and the keynote address was delivered by Randi Weingarten. The video of the full event will be available soon here.

Remarks by Leo Casey

We meet here today in “defense of the public square.”

The public square is the place where Americans come together as a people and establish common goals in pursuit of our common good.

The public square is the place where Americans – in all of our rich diversity – promote the general welfare, achieving as a community what we never could do as private individuals.

The public square is the place where Americans weave together our ideal of political equality and our solidarity with community in a democratic political culture, as de Tocqueville saw so well.

In Defense Of The Public Square

A robust and vibrant public square is an essential foundation of democracy. It is the place where the important public issues of the day are subject to free and open debate, and where our ideas of what is in the public interest take shape. It is the ground upon which communities and associations are organized to advocate for policies that promote that public interest. It is the site for the provision of essential public goods, from education and healthcare to safety and mass transportation. It is the terrain upon which the centralizing and homogenizing power of both the state and the market are checked and balanced. It is the economic arena with the means to control the market’s tendencies toward polarizing economic inequality and cycles of boom and bust. It is the site of economic opportunity for historically excluded groups such as African-Americans and Latinos.

And yet in America today, the public square is under extraordinary attack. A flood of unregulated, unaccountable money in our politics and media threatens to drown public debate and ravage our civic life, overwhelming authentic conceptions of the public interest. Decades of growing economic inequality menaces the very public institutions with the capacity to promote greater economic and social equality. Unprecedented efforts to privatize essential public goods and public services are underway. Teachers, nurses and other public servants who deliver those public goods are the object of vilification from the political right, and their rights in the workplace are in danger. Legislative and judicial efforts designed to eviscerate public sector unions are ongoing.

In response to these developments, a consortium of seven organizations—the Albert Shanker Institute; the American Federation of State, County and Municipal Employees; the American Federation of Teachers; the American Prospect; Dissent; Georgetown University’s Kalmanovitz Initiative for Labor and the Working Poor; and the Service Employees International Union—has organized a to bring together prominent elected officials, public intellectuals, and union, business and civil rights leaders “in defense of the public square.”

Public Servants Versus Private Contractors ... Again

Has the battle over public sector compensation turned a decisive corner? Have much-maligned government workers won an evidence-based victory?

Reasonable people might think so, thanks in part to a study by the Project on Government Oversight (POGO), a nonpartisan group that keeps close tabs on government operations. According to the findings of the POGO report – findings that they call "shocking" – the "federal government approves service contract billing rates … that pay contractors 1.83 times more than the government pays federal employees in total compensation, and more than 2 times the total compensation paid in the private sector for comparable services."

More specifically, federal government employees cost less than private contractors in 33 of the 35 occupational classifications reviewed – and non-federal private sector worker compensation was lower than contractor billing rates in all of the reviewed classifications. In one case, contractor bill rates were nearly "5 times more" than the full compensation rates paid to comparable federal workers.

Are Teachers Driving The Public/Private Sector Earnings Gap?

A great deal of the debate surrounding public sector unions focus on how much public employees earn versus private workers. Every credible analysis – those that account for huge differences between public and private workers in terms of characteristics like profession, education, and experience – find that public compensation is competitive or lower than that of private-sector workers (for recent examples, see here, here, and here, or a review here).

I have, however, heard a few thoughtful observers make the point that virtually all these analyses include education workers, and that this might be a little misleading. It’s a fair point. Roughly one in five state/local government employees are in fact K-12 teachers, while another five percent are professors at public colleges and universities. This is important because analyses of public/private sector compensation essentially compare public employees with workers with similar characteristics (education being the most important one) in the private sector. The research above indicates that workers with more education pay a larger “price” for working in the public sector, whereas many lesser credentialed, lower-skilled government jobs actually pay more. Since many teachers have master’s degrees (and professors Ph.D.’s), and they are such a huge group, it’s reasonable to wonder if they might be skewing the overall estimates.

So, I decided to see if a comparison of public/private compensation that does not include teachers and professors would yield very different results. Let’s take a look.

How To Make A Misleading Public/Private Earnings Gap Disappear

USA Today last week published yet another story claiming that public sector workers make more that their private sector counterparts - this one saying that Wisconsin is one of many states where this is the case. Their “analysis” used data from the Bureau of Economic Analysis, and compared total compensation (salary+benefits) between workers in the private sector and state/local government.

No matter how many times they are told that you can’t just make a straight comparison of dissimilar groups of workers, apparently they still don’t get it. Incredibly, this particular article admits as much, and even quotes economist Jeffrey Keefe, who tells them that the gross comparisons don’t account for important sectoral differences in education and other factors. In other words, their numbers don’t tell us much of anything about public versus private sector compensation. Still, there is the headline: "Wisconsin one of 41 states where public workers earn more." How many people saw that headline, and now believe that public workers are “overpaid?"

USA Today, of course, is not alone. These assertions have lately become insidious, coming from governors, commentators, and others. But when a major national newspaper decides to run this story at this politically-charged time, based on their very own “analysis," a separate response seems in order.

I’ve discussed this issue before, but maybe it would be more helpful to show how the data are more properly analyzed in a step-by-step fashion, using 2009 U.S. Census microdata (the American Community Survey, available from the wonderful organization IPUMS.org). Here’s how you make a false earnings gap disappear in five minutes.