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  • December 2014
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Federal Employees Rake in Significantly More Pay Than Their Private-Sector Counterparts

An April 10, 2012 article in the Wall Street Journal shines even more light on an issue that has gotten significant media attention in the current, difficult financial climate:  the disparity in compensation between public-sector employees and their private-sector counterparts.   While wages are, on average, roughly equal between the public and private sector, public-sector workers enjoy much more lucrative pension schemes than individuals employed in the private sector.

According to analysis by Andrew G. Biggs, a resident scholar at the American Enterprise Institute, and Jason Richwine, a senior policy analyst at the Heritage Foundation,

Public pensions calculate annual contributions based on assumed investment returns of around 8%.  However, they must pay full benefits even if those returns don’t pan out.  In effect, public employees as a group are guaranteed an 8% return on both their own contributions and those made by their employers – at a time when private-sector workers with 401 (k) plans receive a yield of only 2% – 3% on comparatively riskless investments such as U.S. Treasurys.”  Corroborating Biggs’ and Richwine’s findings, a  January 31, 2012 Congressional Budget Office report found that federal employee benefits cost about 48 percent more than benefits for private employees from 2005 to 2010.

At a time when the federal budget deficit exceeds $1.4 trillion, taxpayers simply cannot afford to continue paying for extravagant pension plans of government employees.  Former Massachusetts Governor and Republican presidential candidate, Mitt Romney may have said it best:

Public servants should not get a better deal than the taxpayers they work for.

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