The Wall Street Journal opines today on a subject that I believe will be the next big issue to energize voters. Unfortunately for Democrats it strikes at the core of one the party’s largest constituencies: public employee payrolls.
It turns out there really is growing inequality in America. It’s the 45% premium in pay and benefits that government workers receive over the poor saps who create wealth in the private economy.
And the gap is growing. According to the U.S. Bureau of Labor Statistics (BLS), from 1998 to 2008 public employee compensation grew by 28.6%, compared with 19.3% for private workers. In the recession year of 2009, with almost no inflation and record budget deficits, more than half the states awarded pay raises to their employees.
Even as deficits in state capitals widen and are forcing cuts in services, few politicians are willing to eliminate the pay inequities that enrich the few who wield political power.
These statistics highlight the growing gulf that separates the private sector and the political class. As I’ve said before, the private sector creates ALL of the wealth in this country. Every dollar spent by federal, state and local governments is created by the private sector. Every dollar.
As many of our readers know, the private sector is constantly evolving and remaking itself. With changes in international economies (such as China, India, Brazil, Russia and others) our own domestic corporations have been forced to change and many of these changes (often referred to as restructurings) have been painful for the employees and owners of American industry. The acronym RIF (reduction in force) is a constant reminder to those in the private sector that job security is fleeting. For example, over twenty years ago one of America’s most revered corporations subjected itself to a wrenching restructuring that resulted in thousands of lost jobs, the renegotiation (read: reduction) of retirement benefits (including health care coverage) and reduced pensions for tens of thousands. This company, IBM, had enjoyed a well deserved reputation as a company that long guaranteed job security for decades. What was remarkable about the IBM restructuring was that it was voluntary, painful and ultimately successful. Had the company not taken on the difficult task it would not have survived. There are IBM retirees in my own community today that still live with the painful results of that restructuring. They changed their lifestyles, took part time jobs, downsized etc.
Corporations today are experiencing similar restructurings as they respond to a changing economic environment, which raises the question: why are government payrolls not shrinking in a similar manner? Why is public employee compensation rising when the creators of the wealth are receiving pay cuts and pink slips? (That’s not a rhetorical question.) As private sector unemployment worsens and people exhaust their savings after just “hanging on” during a year or more of joblessness the swelling political class (with its high priced salaries, benefits, retirement, and permanent job security) will become a target of anger and resentment from the private sector. The resentment is a result of a lack of public sector accountability and discipline (both attributes that determine survival in the private sector).
There is a much more anger and resentment on the horizon. Just sayin’, Josh.