Incentives Are the Difference Between Public and Private Sector Workers

It was probably a year ago that I cancelled my subscription to The Capital–not in protest or anything because I do enjoy reading it, but for 2 reasons.  First, I found that on most days I would just recycle it without reading anything, and second because I found a more efficient way to line my outdoor table for eating crabs.  I kept my paper box, however, because I still wanted to receive the lovely landscaping flyers and community propaganda and that type of stuff can’t go in the mailbox!

Consequently, it’s more difficult to use letters to the editor as blog fodder.  The best source of opinion now is probably the commenters on the Capital’s web site, a crowd of probably 30 regulars that sling entrenched opinions from the comfort of computer screens.  Little known fact: every year the online opinion world competes in the “Mom’s Basement Bowl”, whereby competitors try and type the nastiest slur possible while eating a bowl of chips and dip.  Last year I came in 5th place. (My dip was too thick and my chip broke in half just as I was about to lay into the Deputy Streetsweeper.  Major disappointment.)

So I was looking through the comments on this story, and a mini debate erupted regarding workers in the private sector vs. the government sector.  The current paradigm of course is that private sector workers think that government workers meet for happy hour every day at 2 pm on a beach in the Bahamas, and government workers think that private sector workers ignore the vital role of government employees, which the private sector workers are too greedy and selfish to ever do themselves.  As always the truth is somewhere in the middle.

There are lazy people and hard working people in both sectors.  The Annapolis City Clerk, for example, is one of the best government employees I’ve ever come across.  The base city clerk salary I think might be $70-$75k, with benefits pushing the total compensation to $90k ish off the top of my head.  Fair cost to taxpayers?  Could someone willing to work for $20k less do the same job?  Does a private sector worker making $50k require the same job skills?  Hard to say.

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The problem is incentives.  Private sector employees have an incentive to work hard because if not they will get fired.  Businesses pay their employees with their money–it’s an investment.  If the investment doesn’t pay off, the employee doesn’t work there anymore.  I can’t really think of an example of tenure in the private sector.  Maybe unions offer some type of protection for seniority, maybe other examples exist that I don’t know about.  But governments are a different story.  The people that pay the salaries of government workers (you) don’t have a say in how these workers do their jobs.  That’s the problem.  Government managers don’t have as profound an incentive to keep their workers productive because they are paying them with a third party’s money.

My guess is that workers that coast through their jobs (in either sector) are workers that have no mobility, either upward or downward.  Or ‘outward’ I guess–gotta get all the ‘ward’s in there.  With no fear of being fired, and no possibility for advancement, why work hard?  Maybe an intrinsic work ethic keeps you busting your butt for a while, but eventually you realize you get the same money no matter how much work you do.

I do think the government has been trying to place more incentives for pay raises based on merit.  I think this only on the basis of knowing that my brother, who works for the IRS, makes more money if he does more stuff like get continuing education or whatever.  Even so, a recent study found that all things considered the average federal worker makes double what the average private sector worker makes.  Theoretically a cost of living raise should match inflation, but the raises received by government workers have outpaced inflation by 33% since 2000.

Some job requirements of government workers wouldn’t be tolerated by the private sector.  The city clerk, for example, has to work from 7 pm to 11 pm every other Monday night, and sometimes has to stay at the office until midnight in case candidates want to file for election at the 11th hour.  How much overtime would have to be paid to a private sector employee to do the same?

I am confident that good and bad employees exist in both sectors.  I am also confident that government is less efficient than the private sector–much of my political belief system relies on this confidence.  The government will never be able to provide the same incentives that markets do, which I believe is why we should have as little government as possible.

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