This post was updated to reflect a change in private sector compensation.
For the first time in Pennsylvania’s history, the average cost of a state employee exceeds $100,000, according to the Office of Administration. This amounts to $48.11 per hour. For context, private sector compensation reached $33.55 as of September 2017.
Put another way, the average cost of a public employee is 43 percent more than a private sector worker. As the chart below indicates, the explosion in benefits over the last 10 years—an increase of 79 percent—is the primary driver of growing compensation.
Despite a reduction in the state’s workforce of more than 6,300 people, total employee compensation costs have risen by an inflation-adjusted $1.25 billion over the last decade. And costs will likely increase given the contracts Gov. Wolf negotiated with two of his largest campaign contributors in 2016.
Health benefits and pension benefits have been especially costly. In 2008, the state’s contribution for pensions was $1,845 per employee. It’s now an astronomical $15,871.
There’s no doubt the unsustainable growth in public employee compensation is contributing to Pennsylvania’s fiscal challenges. If it’s left unchecked—along with other cost drivers like education, welfare, corrections, and debt service—the commonwealth’s finances will continue to deteriorate.
Restructuring benefits and right-sizing the workforce are both critical to bringing down the state’s payroll costs. Policymakers can accomplish the former by building on the pension reform passed last year and by bringing public employee health benefits in line with those of the private sector.
A management consulting firm, McKinsey & Company, studied the latter issue just last year. They released a report recommending changes to the state's workforce, including reducing the number of positions available and reducing the “span of control” by increasing the number of direct reports under each supervisor.
These reforms—along with limiting the scope of collective bargaining—would help reduce the compensation inequality between public and private employees and protect working people from bearing the costs of a bloated public sector.