Government vs. private-sector jobs

Patrick Gibbons

*Nevada’s legislatively approved plan for pension reform.

Las Vegas Sun journalist Patrick Coolican spells out the difference in today’s paper. In the private sector, workers receive good salaries in exchange for little stability. If workers are inefficient, they get fired, while the best workers see promotions and more pay. This provides private-sector employees a strong incentive to be productive and innovative workers.

Historically, government workers started with low salaries but greater stability. Bad government workers often keep their jobs while still getting pay increases each year. Private-sector workers are risk takers while government workers are risk averse. As Matthew Murray, an economist with the Brookings Institution, noted:

What you get with government employees, by virtue of these steady jobs, you get risk-averse people. They may be good solid employees, but they may not be very innovative. Safe jobs attract people who want a safe environment.

I might add that while private-sector jobs have considerably less stability than governments jobs, the average American is far more confident of finding a new job, should he or she become unemployed, than is the average worker in France, Italy or Germany, according to Olaf Gersemann, author of “Cowboy Capitalism.” In fact, the average American spends considerably less time being unemployed as jobs are found far more quickly.

Coolican raises a meaningful point about reforming government pension plans:

The idea of paying teachers or social workers high starting salaries seems wishful thinking. But what if long-term pension liabilities could be sharply reduced by forcing those young workers, many or most of whom won’t make the cut after a few years, into a defined contribution plan, say a 401(k) with an employer match? The savings could go to higher salaries.

A defined contribution plan would help get Nevada taxpayers off the hook of expensive defined benefit plans – plans which are always insolvent in the long run. But it could also help produce a better retirement plan for government employees.

At the very least, moving more people onto sound economic principles for their retirement and wealth – rather than continually increasing taxes – would be far more equitable for all citizens.