News Story

Public-Sector Unions Fight to Keep Bloated Benefits

Between Gov. Rick Snyder’s call for a substantial business tax cut and a $1.8 billion state overspending budget gap, lawmakers are looking for places to save. Many both in and outside government are calling for lowering government employee benefits to private-sector levels, so not surprisingly public-sector unions are gearing up for a fight.

The first offensive began with a media onslaught: “(T)he state’s largest teachers union says school employee compensation is comparable to the private sector,” wrote Peter Luke of The Grand Rapids Press. His column reports that the Michigan Education Association will “provide the data” during the upcoming budget debate that shows the “total compensation” received by teachers is comparable to those in the private sector. The MEA’s argument is that, when controlling for education levels, public-sector employees may actually be underpaid compared to their private-sector counterparts.

However, the unions rely on data from allies in academia and government who often look only at salaries when comparing private- and public-sector compensation. In fact, it’s skyrocketing public-sector fringe benefits that are behind much of the disparity. “Total compensation” properly includes benefits like paid leave, retirement contributions, health insurance and more. In each of these, public-sector benefits tend to be far more generous.

Comparing salaries while controlling for “education level” introduces additional problems. For example, a virtual prohibition on merit pay in public schools means that teachers employed by the government are much more likely to pursue higher degrees because, along with additional years on the job, more credentials are the only way for an individual to boost his or her pay level. Many school districts even subsidize employees acquiring these extra academic letters after their names, regardless of many studies showing that additional degrees have little effect on their classroom performance.

Finally, their own self interest must be considered when assessing any pronouncements from government employee unions on the relative generosity of public vs. private sector compensation. Simply put, the MEA and its cohorts are in the business of maximizing the amount of money transferred from taxpayers to its members. Even school union bosses admit that their job is not to serve the best interests of children, and certainly not those of taxpayers. In contrast, lawmakers and the public they are supposed to represent have a duty to pursue a much broader set of goals: to get the most service, including the best education for children, at the least cost.

At the state level, employee compensation has risen 46 percent over the past decade; that means Michigan taxpayers are shelling out an additional $800 million every year. Local governments and public school employee costs have also sharply risen. Yet the state has fewer workers, the schools have fewer students, and the test scores of those students have stagnated, not risen. Few taxpayers think they’re getting 46 percent more value from the state today than in 2001, or that government and public schools are a “jobs bank” with taxpayers existing only to serve those institutions’ employees.

The government unions will do their utmost to sow confusion and muddy the water on these issues, but the facts are clear: Government employees’ overall compensation has risen steadily over the last decade, swamping any savings from reductions in their numbers. A prerequisite for Michigan to get back on track fiscally and economically is to put these benefits in balance.

Mackinac Center research pegs the public vs. private fringe benefits imbalance at $5.7 billion annually. This is more than enough to balance the budget, eliminate the Michigan Business Tax, fix the roads and still have money left over for rainy days.


Jarrett Skorup is research associate for online engagement at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the Center and the author are properly cited.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.