Did Anyone Actually Read Liu’s Report?

Liu's report compares private sector and public sector pay, and claims that NYC's public employees are underpaid and thus, one might assume, are being cheated and deserve to retailiate by doing less work in the coming year. But they way the comparisons are made shifts from one part of the analysis to the other, always in ways that would make public sector pay seem lower.

A mean is used rather than a median, thus overstating the influences of the overpaid people at the top in the private sector. The comparison is for workers in the same occupation in some cases, but all college educated workers in other cases. Notably teachers, the largest group. Either could be justified. The choice of which is used for which group is no accident.

Public benefit levels are compared not with all private employees who must pay for them in taxes or diminished services, but those in large wealthy corporations.

The report doesn't compare pension funding over time, and does not account for the fact that the public sector has been underfunding pensions (which were retroactively enhanced) while the private sector is not allowed to do so (at least to the same extent — unfortuately they manage to get away with it sometimes). Public sector pension contributions have to soar to make up that difference.

Because the city has not been fully funding the retroactively enhanced pensions, the report concludes they are cheap. "According to the Actuary’s most recent estimates, for a 25 year-old male entering the NYCERS pension system (Tier IV, non-physically taxing) the City’s EAN rate is 4.33 percent; for a 25 year-old female, the rate is 4.92 percent.36 These are the amounts, expressed as a percentage of salary, which the City must contribute to fully fund its pension obligation to those workers. For 30 year-old male and female entrants, the rates are 5.41 and 6.17 percent, respectively. For 25 year-old male and female teachers entering the Teachers’ Retirement System, the rates are 5.68 and 5.99 percent, respectively."

The city's public employee pension contributions will average 40 percent of of wages next year. Perhaps because of the past use of the assumptions above, which are provided with no justification.  We would be facing fiscal problems as a result of not paying enough for the generous pensions public employees were promised when originally hired.  Adding on the retroactive enhancements and pension incentives over the past 15 years that were not paid for at the time, we're hosed.

The report concludes that police officers and firefighters do not work more overtime to increase their pensions. No table is included (I always include one). A chart appears to show much more overtime for those with 20 years of work or more (eligible for retirement) than those with 20 years or less (not eligible), with a particular spike for police officers at 20 years. But some odd reason, the report concludes "uniformed police with 15-17 years of service worked an average of 251 overtime hours in FY 2010, while those with 18-20 years of service worked an average of 281 hours, a difference of about 11 percent." Those with 18 or 19 years of service are not eligible to retire. Those with 21, 22 or 23 years are eligble to retire. Why not compare 1-19 with 20 or more.

And, of course, the report does not make adjustments for the work that is expected in exchange for that compensation. My experience working in both sectors is that in the private sector you are expected to do a lot of work, but in the public sector you are prevented from doing very much (unless you work completely independently). Which you prefer depends on who you are. But over time, people probably gravitate to the option that meets their preferences.

Rebenchmarked Current Employment Survey data is out, and I have a lot of work to do, so what you are getting is a five minute review of the document. I'll try to look at it later, and any back-up if I can find it. But my response to all these sorts of reports is found in this post.