Return to First Principles

Fiddling away the time


These are difficult times. To get out of them, public officials will need to make difficult choices.

There are few places in the nation where the situation is more dire and the need to implement dramatic change more pressing than here in Rhode Island. Recently, Rhode Island was ranked the second worst managed state in the nation. For the informed voter, this came as no surprise. Among the 50 states, Rhode Island has been ranked as having the worst business climate, the second worst unemployment rate, the third largest debt per capita, and the fifth highest tax burden. Unfortunately, politicians unable or unwilling to make difficult decisions focus on distractions. Recently, Rhode Island’s governor garnered national attention by steadfastly calling a Christmas tree, a Holiday tree. At least he chose not to emulate officials of the defunct Soviet Union, who referred to it as a New Year fir tree. At the General Assembly, one state legislator, who has been there for two decades, wants to legalize marijuana in the hopes that the state will tax it. Someday, maybe in Rhode Island, the slogan of “Just Say No!” will give way to “Get Stoned. Get Taxed.” Meanwhile in Cranston, the City Council wants to ban residents from having multiple bird feeders on their property because of rat problems. But a month later, a majority of the City Council voted to allow residents to raise multiple chickens in their backyards. Maybe someone will be inspired to rewrite Aesop’s fable entitled “Country Mouse and City Mouse.” This time, instead of country mouse fleeing city life, country mouse will stay in the city because the poultry droppings remind him so much of home. While this nonsense garners much attention, the average voter probably missed a recent economic study pointing out one of the fundamental economic problems facing Rhode Island, which is that government employees in Rhode Island garner more in compensation than their private sector counterparts.

About two weeks ago, a study performed by economists was released by the Rhode Island Center for Freedom and Prosperity, a group that promotes limited government policies. This study showed that Rhode Island’s public sector employees garner more in total compensation than private sector employees in Rhode Island. Specifically, Rhode Island’s average public employee compensation was 20 percent higher than Rhode Island’s average private sector employee compensation. The Rhode Island public sector employee received, on average, $100,217 in wages and benefits while the average Rhode Island private sector employee received, on average, $83,419 in wages and benefits. In comparison, in neighboring Massachusetts and Connecticut, the average private sector employee received slightly more than the average public sector employee. Even the base salary of the average Rhode Island public sector employee was 4 percent higher than the average Rhode Island private sector employee. In no other New England state did the base salary of the average government employee exceed the base pay of the average private sector employee. On top of this, the average Rhode Island public sector employee works about 5 percent fewer hours than Rhode Island private sector employees. In fact, the average Rhode Island public sector employee works fewer hours than the average government employee in any other New England state. Some will argue that certain public employees are more highly educated than the average private sector employee and therefore public employees deserve more pay. However, this study showed that when education and experience was considered, the Rhode Island public employee received 26.5 percent more in compensation than their similarly situated Rhode Island private sector employee.

The study does not discuss the causes for why Rhode Island public employees obtained a higher level of compensation than similarly situated Rhode Island private sector employees. However, Cranston history provides some insight as to why this occurred. As government’s role expanded during the 20th century, the public employee workforce grew as well. As it grew, so did the political influence of public employees. For decades, Cranston mayors routinely championed and implemented measures that improved the compensation of public employees or increased their job security. It was politically hazardous to challenge public employees. For example, after Cranston Mayor Earl A. Colvin, a mild mannered frugal farmer, battled with the Cranston teachers’ association over compensation and questioned “how many of the taxpayers” earned as much as teachers, he lost re-election in 1960. During the 1960s, public employees gained even more power as they organized into unions and the Rhode Island General Assembly enacted legislation that granted them collective bargaining rights. As a result, public employee compensation, especially benefits, increased. In the meantime, for decades, businesses had been leaving Rhode Island primarily because of either high taxes, caused by increases in government spending, or high labor costs arising from the militancy of private sector labor unions or from costly union-backed state legislation. By the early 1980s, the largest employers located in Cranston were governmental entities like the State of Rhode Island, the School Department and the City of Cranston; employers that consumed, rather than generated, tax revenues. Subsequently, while global economic competition forced private sector employers to be more efficient, public sector employees protected by unions remained immune from these competitive pressures. Government remained a monopoly provider of essential services that was managed by elected officials who either supported public employee unions or were fearful of them.

There are consequences arising from Rhode Island public employees enjoying a higher level of compensation than similarly situated Rhode Island private sector employees. One consequence is rather simple to understand and clear to discern. Rhode Island taxpayers pay more in taxes than they should for the government services they receive. When public servants garner more than the public they serve, the public is not being served. Instead, it is being abused.

For many years, Rhode Island public officials have failed to follow the fundamental principle that public sector compensation should be no higher than private sector compensation for similarly situated employees. Adherence to this principle would lead to lower personnel costs in government. Lower personnel costs can lead to lower taxes. Lower taxes can lead to more private sector jobs. Until Rhode Island public officials adopt measures to bring public sector compensation into line with private sector compensation, Rhode Island will remain a state where taxes are high, and good paying private sector jobs are scarce.

History records the infamous rumor that while Rome burned, the Emperor Nero fiddled. History will show that Rhode Island politicians who did not strive to bring public sector compensation into line with the private sector, but instead pursued trivial matters, were merely fiddling away their time in office.

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