…This is part of an argument the government workers are not underpaid. As a central planner, you are convinced that you can measure a worker’s value by looking at characteristics such as education level.
Two points I would make.
1. The government can never know the value of a government worker. We do not know the value of the output that they produce. The socialist calculation problem is very real.
2. We might be able to make a guess about the opportunity cost of a government worker. That is, what does the worker forego in order to work for the government? To make this guess, we would want to look at the willingness of people to take government jobs and the willingness of people to leave government jobs. If the government has a hard time filling positions, then those positions are likely to be underpaid relative to opportunity cost. If the government has a hard time retaining workers, then those workers are likely to be underpaid relative to opportunity cost.
It seems to me that no matter how many studies one does of pay relative to education or other characteristics, they will only be convincing to dedicated believers in central planning. If you held a gun to my head and made me a central planner, I suppose that I would try to allocate labor by measuring characteristics of workers and aligning those characteristics to jobs….
1. Several people have mentioned a weird thing about being uncomfortable controlling for education, as if I’m making stuff up on the fly. If you don’t know this you’ll just have to believe me, but controlling for education while comparing wages is necessary. If they didn’t do that, you’d have to ignore and throw out the study. I simply can’t imagine the idea of not controlling for years of education and/or an education level when comparing wage levels, either between industries, genders, locations, and/or employers (public versus private).
2. I also don’t fully understand what Kling is arguing against. State and local government workers are underpaid, particularly at the high end of education. I understand the arguments about how to properly control for long-term benefits, but on the first approximation a college-level worker makes 25% less in total compensation and a lawyer or other professional worker 37% less.
And yes, the government does hire in a market where it has to compete with private employers. If they paid too little and demanded too much workers would go elsewhere. Now if workers were overpaid relative to private market workers, we’d have a discussion. But they are paid too little here at the state and local level. I think Kling’s argument is that government workers are (or perhaps government work is) lazy and unaccountable to productivity. Fine. But that goes to why people would take the wage cut when they have high human capital. I’d like to think a sense of civic purpose too, but not necessarily. (Separately, at the Federal level, many of the higher paying jobs are ridiculously competitive, often pulling from the most elite colleges.)
Markets exist in all kinds of labor markets where the “marginal product” of a unit of labor doesn’t make a ton of sense or isn’t very clear, from the non-profit where I work to places like social networking, national defense, and radio production. Yet there are competitive markets for the labor in each of these.
At the “high school” through “associate” degree level there is a compensation premium (not wages, which are lower across the board), but that is more the result of declining wages and benefits in the private market and not a runaway government spending spree. Yes, you could probably hire cops for $8/hr and no benefits to squeeze government workers down to private level wages. But is a failure of the current private market for benefits, not the public one.
3. Fun thought of the day that I’m not certain is in anyway correct, but let’s double down: We do have a reason why government wages might be lower – the government is a monopsony purchaser of labor in many fields, particularly those that monopolize violence, and particularly those that can confer certain types of prestige. Also it makes a monopsony market for labor in many places and locations too. (FYI: Monopsony is to buyers what a monopoly is to sellers; from our point of view firms purchase labor.) For those who want to be in criminal justice and/or administer to the peace, for those that want to join the military, for those who want to be regulators, work in the bureaucracy, work in or for the courts, etc. there is often only one game in town: the government. As such, it can squeeze wages downward. I don’t know if this is why certain types of high human-capital jobs get paid less, but it is a thought.