The Cleveland Plain Dealer‘s editorial page may support Issue 2, but that didn’t stop its cartoonist Jeff Darcy from having some belated fun on “Grannygate.”
Meanwhile, as Joe mentioned yesterday, Kasich got the first claim rated by PolitiFact as “Pants on Fire” in the entire SB 5/Issue 2 debate. Then, it also rated Building a Bitter Ohio’s claim (we should have been using that name all along) that public employees make 43% more than private sector workers as “Mostly False.”
AEI authors Andrew Biggs and Jason Richwine said that wages were “comparable,” that pensions and health insurance helped give public workers a 31.2 percent edge in non-wage benefits. The most significant factor came in the way they calculated pension funding for public and private sector workers, putting a premium on the “guaranteed” element of public pensions. We will return to that.
Alicia H. Munnell, director of the Center for Retirement Research, told us that the largest points of contention with the AEI study came over pension funding and job security.
The primary issue with pension funding was disagreement about the “discount rate,” which is the interest rate used in figuring how much money must be set aside today to make future payments.
The estimates of those costs in the AEI study push up the figure for public employers far higher than what the Center for Retirement Research found. Conversely, AEI’s study projected smaller Social Security costs for private employers.
Several economists told us that the discount rate is a hotly contentious issue in the field, largely because the “correct” rate can’t be proven empirically.
Munnell noted that the center put no added value on job security, because the historical advantage in the public sector has diminished or disappeared. When it has existed, she said, job security was taken into account as the trade off for lower wages in public employment. Making it a separate factor would be double counting.
“We concluded,” Munnell said, “that public sector compensation in Ohio is 9 percent higher than private sector compensation.”
Even leaving out the considerable disagreements over the calculation of pension costs, the inclusion of job security as a monetized figure in compensation is questionable. The AEI study says that security has a value of 10 percent of the pay. But that doesn’t translate to more money paid to the employee.
Whether it exists or not, job security is an intangible factor, like job satisfaction, that can’t be spent, saved or taxed. It doesn’t put more dollars and cents into employee compensation.
We think it is misleading to include it in an accounting of what workers “make.”
Also, the AEI study arrived at its 43 percent figure through rounding that we could not follow, and which the Center for Retirement Research questioned, after adding the 10 percent for job security to the 31.2 percent advantage in non-wage benefits it says that public workers have a 43 percent edge over their private sector counterparts.
And that 31.2 percent advantage — whose calculation is the subject of considerable disagreement in the pension and financial worlds — is more than three times the finding of the Center for Retirement Research.
I had criticized PolitiFact because it seemed to disproportionately focus only on claims by We Are Ohio. Maybe that’s because We Are Ohio is on the air more than 3:1. I don’t know. Regardless, it’s about time for PolitiFact to start to look at the laughable claims of Building a Better Ohio and John Kasich.