Employees in Wyoming’s public sector have experienced the largest rate of wage and benefits growth over the private sector in the entire nation, according to a new paper from a Washington D.C. think tank.
Federal wage data compiled in an analysis released this week by the conservative American Enterprise Institute shows that Wyoming’s public sector workers earned roughly $39,000 more in combined wages and benefits than they did two decades ago, while those in the private sector experienced gains of less than $9,000 during that same period.
This widening in the gap between public and private employees was the largest in the nation during that time, and second only to Nevada in terms of relative growth.
The paper directly challenges a number of reports on the earnings gap between the public and private sectors released by the left-leaning Economic Policy Institute in recent years, which have found state and local public employees receive salaries and benefits lower than those of their private sector counterparts.
In contrast to the EPI’s report, the data utilized by the American Enterprise Institute – in regards to compensation – also calculates the value of benefits in an employee’s overall compensation, resulting in a large swing upward for the public sector versus the private and raising a number of new questions for policymakers.
“Has public sector compensation risen above pay for similarly-qualified employees in the private sector? Does the substantially larger share of total compensation dedicated to benefits in the public sector better serve the needs of public employees and governments’ need to attract and retain quality workers? These are policy questions that require different data and methods to answer,” the report reads.
A different view
Despite the disparities highlighted in the American Enterprise Institute’s numbers, low wages and poor benefits in state government have actually led to a situation where Wyoming is struggling to attract and retain top talent, according to some of the state’s current and former leaders.
In a 2018 letter to the Wyoming Legislature, former Gov. Matt Mead wrote that across state government, workers were actually making less money in salary than they were three years prior, largely due to factors like rising health insurance premiums and deductibles. This – combined with a lack of increases in pay to match inflation – led to a nearly 4 percent increase in the state’s already high rates of turnover between 2016 and 2017.
“Now, more than ever, to find efficiencies and build new processes means we need the best possible employees in state government. So, let us make that investment in productivity and our employees,” Gov. Mark Gordon said in his State of the State speech in January, several months before the Legislature’s passage of $12 million in raises for state employees recommended under Mead’s final budget. “I support this request because I know how vital motivated and talented employees are to efficient, cost-effective government.”
Meanwhile, other aspects of Wyoming’s public sector, like education, have struggled to a greater degree in regards to compensation. Pulling numbers in the new report, Kathy Vetter, president of the Wyoming Education Association, noted that over the past 20 years, average private sector wages rose by a rate of 15 percent over inflation while public education ticked up by only 5 percent.
“The fact that teacher salaries have not kept up with inflation is a very good point,” she said. “I believe that when [The National Education Association’s] new report comes out you will find Wyoming’s salaries have not kept up with inflation by an even larger percentage than the 4.5 percent.”
Room to cut still?
Some groups maintain government costs should be reined in. The Wyoming Liberty Group, which generally opposes increases in public spending, has frequently argued that Wyoming per capita spends more on its government employees than the rest of the nation, even after massive cuts to state employment in the last bust.
Some of this cost could be cut in benefits, which represents a significant share of the disparity that has grown over the past two decades, according to the group. Sven Larson, a contributor to the group who is currently working on a white paper about the cost of education in Wyoming, suggested that the state could reduce costs in various ways, including by moving to a model where employers pay out pensions to employees while they are working, letting them invest the money and getting the state off the hook for future payments.
“Wyoming has actually had its credit downgraded because of our unfunded pension liability problem,” Larson wrote in an email. “This, together with structural spending reforms, should put us on a different and more fiscally sustainable track for the future.”
Much of the growth in public sector benefits, said Department of Workforce Services Senior Economist David Bullard, dates back to changes to the state’s insurance and retirement plans in the late-1990s and early 2000s. However, the growing disparity between the public and private sector has another source: a lag in private employers providing benefits to their workers of equivalent value to those offered in the public sector.
Part of the reason for this, Bullard said, could be the high cost of health care in Wyoming, which could discourage private employers from wanting to provide similar benefits to those offered in the public sector. Tens of thousands of Wyomingites – most of whom are employed – do not have health insurance or don’t have benefits like pensions or other retirement plans, which the American Enterprise Institute study accounted the value of in its report.
“That probably plays a role there, too,” he said.
Given the state’s difficulties in retaining workers, the report raises a number of questions beyond public sector compensation at a time when nationally, private sector wages have remained stagnant for millions of Americans.
Public sector wages, naturally, are less prone to fluctuation in Wyoming than those in the private sector, which are intrinsically tied to the state’s extractive industries. While the boom-and-bust nature of Wyoming’s economy makes apples-to-apples comparisons of wages from one year to another difficult, wages in Wyoming have, for most industries, been slow to grow.
More recently, according to data contained in a report released by the state Office of Administration and Information on Wednesday, personal income growth in Wyoming trailed the national average this past quarter, despite significant gains in employment.
Narrowing the gap, said Larson, could potentially be answered by empowering the private sector through the Wyoming Legislature. Most state policy decisions focus largely on extractive industries and less on the rest of the private sector, where wages are substantially lower, he added.
“Their legislation and their tax and spending policies tend to reflect this bias, which over time — unintentionally but nevertheless — has made life difficult for entrepreneurs outside of minerals,” he explained.