Do state employees need a raise? Not according to latest survey
Salary comparisons are a tricky thing. The state recently contracted with Segal Consulting to conduct a salary survey among invited employers to get an idea of where state employees stand in comparison to public and private sector workers.
Conclusions drawn from this type of data can be problematic. On the one hand, results show that “two-thirds of state job classes are at or within 25% of the market,” according to the Office of Financial Management (OFM). That sounds like the state is on the right track in terms of competitive compensation. On the other hand, “the trend is consistent with what we have found in past surveys…the majority of our ranges of consideration (base pay) lag behind both the private sector and other public sectors,” according to a spokesperson at OFM’s State Human Resources division.
“Market” includes government employers, heavy representation of Puget Sound private employers
So is the state competitive or behind? The answer is both, depending on which data one chooses to emphasize and how the “market” is defined. Half of the survey’s 78 participants were public employers, which the state included in its definition of “market.” This is problematic, since public sector salaries are determined by political rather than market forces. Public employee salaries are set by people whose personal bottom line is not affected, unlike private sector employers. It means that incentives for public and private sector employers are different, as they should be, since governments are supposed to fill roles that the private sector cannot.
But setting public sector participants aside, it is notable that 74% of private sector participants were based in the Puget Sound (King, Pierce and Snohomish counties). Only 16% of survey respondents were outside of those three counties, and the remaining 10% were out-of-state employers. Obviously the Puget Sound houses the largest portion of Washington residents, but Washington is a state-wide employer, and a Puget Sound-centric survey has the potential to skew salary data for particular jobs much higher than what is paid for the same job in other areas of the state.
For some industries, such as construction or administrative services, only one or two employers responded to the survey, which forced the state to use supplemental data to try to capture a more useful salary comparison.
Public sector fringe benefits often exceed those of private sector
There were some notable differences between public and private sector respondents identified in the survey. First, unionization levels were far lower in the private sector than public.
If the goal of the salary survey is to identify hits and misses in terms of lining up with the market, this is already a huge miss, though not one likely to be highlighted by union bosses during the course of ongoing secret salary negotiations. The union chokehold on public sector employees is highlighted very clearly in the data.
Second, performance pay is used heavily among private sector respondents, compared to the public sector. Only 41 percent of public sector respondents offer performance-based pay, compared to more than double that rate in the private sector at 87 percent. This dramatic difference can be at least partially attributed to unions as well, who have vigorously opposed most forms of pay-for-performance in favor of a more tenured employment structure.
Third, paid time off appears to be comparable for public and private sector respondents, though sick leave benefits tend to be more generous in the public sector. Of private sector respondents who provide sick leave, only 21% allow cash-out options, compared to 79% of public sector respondents.
Finally, public employees get other perks that can add up to extra pay that are much less common among private sector respondents such as night, weekend and call back pay differentials. Only 54 percent of private sector respondents were eligible for pay differentials, compared to 97 percent of public sector respondents.
These points are peripheral to the main point of the survey, which was to evaluate salaries for comparable jobs, but they nonetheless illustrate a significant point: unions do a fantastic job negotiating at the margins. Budget constraints and debates sometimes prevent direct salary raises for public employees, but fringe benefits are less visible and more susceptible to movement.
Newsflash: Employees care about more than base salary, state employee retention data proves it
The table below (created by OFM using survey results) is one likely to be highlighted by union negotiators to further the push for higher salaries for state employees.
Indeed, similar conclusions from the state’s last salary survey in 2010 were seized upon by Washington Federation of State Employees President Tim Welch. “Part of contract negotiations is to correct inequities. Not that we’ll have an easy time at the table doing it, but it’s our job to try,” he told the Olympian.
But without a critical understanding of how these conclusions were drawn, it’s disingenuous to take these results in isolation, rather than in context.
When I questioned the survey methodology, an OFM spokesperson told me, “…salary survey results are base salary only and do not take into account the total compensation that state employees receive, including medical/dental benefits that are platinum/gold rated and secure retirement plans.”
“Total Compensation Survey” is a misnomer for this particular survey, since the primary emphasis was on base salary. There are plenty of factors aside from salary that contribute to job satisfaction (or lack thereof). Fringe benefits such as retirement, medical, dental, life insurance, disability insurance, and paid time off are some of the things an employee considers when deciding where to work. But there are other benefits that may be harder to measure and compare, such as job stability, workplace conditions, or flexible work hours. The state is indeed very competitive in some of these areas, particularly with respect to generous defined-benefit retirement plans and medical benefits virtually non-existent within the private sector.
A salary is only one of many selling points to a potential employee, which is probably why the majority of state job classes have a retention rate of 90 percent or higher—even those that fall more than 25 percent behind the market in base salary. According to OFM, “Across the enterprise (aggregated statewide data) our current compensation market position has not adversely impacted employee retention, turnover or our ability to hire.”
This begs the question as to why Governor Inslee finds it “unacceptable” that state employees have not received a cost of living raise in several years (though many state employees have received step increases based on experience). As the executive of the state, responsible for representing taxpayer interests at the bargaining table, and for negotiating a budget that is in the best interest of Washington residents, it makes little sense to promote a pay raise for state employees who are satisfied enough with their jobs that 90 percent or more of them choose to remain employed by the state. From a political standpoint, however, this is the posturing of a governor who was heavily supported by unions in the 2012 gubernatorial race, accomplished little to nothing for them during the latest legislative session, and is seeking to reopen their pockets prior to his reelection campaign.
Is it government’s role to compete for talent?
Finally, in relation to the purpose of this survey, the point that is completely lost on the governor, the legislature and the unions is that “meeting market demand” and “competing for talent” with the private sector is not government’s role. In that sense, the state has lost the forest through the trees. The state and taxpayers would be better off competitively contracting jobs that already exist within the private sector. Why should taxpayers take on the cost and liability of in-house graphic designers, IT personnel, electricians, carpenters, painters, mechanics, etc., rather than creating performance-based, competitive contracts that leverage the state’s position to get taxpayers a better deal? In other words, meet market demand by contracting where there is a market, not by figuring out ways to get more people on the government payroll.
1 State of Washington, 2014 Total Compensation Survey, Segal Consulting, p. 10
2 Ibid. p. 13
3 Office of Financial Management, 2014 Salary Survey Presentation, p. 13, April 9, 2014