The Legislative Finance Committee wants to give New Mexico government employees raises of 1.5%. After all, “we’ve” got $199 million in new money burning holes in “our” pocket. Time to spend it right?
Well, how are New Mexico’s government employees paid relative to private sector workers in our State?
According to the folks at Key Policy Data who actually track this information showed in the following chart, “New Mexico State and Local Government Worker Compensation as a Percent of Private Sector Compensation,” New Mexico’s government employees are compensated 16% better than private sector workers. That is the 16th-highest compensation rate among states in the US.
Given the still-sluggish New Mexico economy, it seems that working for government is a pretty good deal in New Mexico. While there are many uses of the “new money” we’d likely take issue with, it is hard to see how raises for government employees is the best option.
$199 million is really not a lot of money in a government environment. I think it best it is saved for a rainy day for refunded to taxpayers.
A few days ago, Wall St. 24/7 rated NM as the 49th worst run state in the U.S., edging out Louisiana which was in last place. As a reward for not coming in last, state employees richly deserve a raise.
49. New Mexico
> 2016 Unemployment: 6.7% (the highest)
> Pension funded ratio: 70.6% (23rd lowest)
> Credit rating and outlook: Aa1/Negative
> Poverty: 19.8% (3rd highest)
New Mexico is one of many struggling states with a dwindling tax base. Some 7,100 more people moved out of New Mexico than moved in between July 2015 and July 2016. In addition to a shrinking population, New Mexico’s labor force is also decreasing. The state’s labor force size fell by 0.3% in the last half decade. While a smaller workforce can often mean a lower unemployment rate, some 6.7% of workers in the state were out of a job in 2016, the highest annual unemployment rate among states.
Economic growth would likely go a long way to reducing unemployment, yet New Mexico’s economy is stagnant. The state’s GDP grew by only 0.2% in 2016, even as the U.S. economy expanded by 1.5%.
And don’t forget the 350-400 million dollars in balloon payments coming up in the next few years to cover the financing of the Rail Runner!
Move along….nothing to see here. (Karen take note)
Can nm just default on the railrunner? Its not essential. Let private industry take it over and the debt…
The “Key Policy Data” website you reference is certainly full of interesting information. I do have one problem with this sort of comparison:
When comparing compensation of one set of workers with another, to be fair one needs to control for education level, years of experience, and other factors, as is done in most academic research of this type. (See for example http://crr.bc.edu/wp-content/uploads/2011/09/slp_20-508.pdf).
Depending on the distribution of types of jobs in government and the private sector in a state (e.g. how many of each require a college degree) this type of comparison can be rather misleading.
Thanks for that. I have seen other comparisons of national data including from American Enterprise Institute which do indeed control for this. I’ll check with the author and see if he has a response.
William, thank you for sharing your concerns about our government workforce analysis.
First, I agree that state and local government workers are more likely to be white collar professional jobs that often require more education than the average private sector job. I control for this by comparing a state’s compensation level with the national average which is at a 14 percent premium relative to the private sector. A state is penalized in our analysis only when it exceeds the national average.
Second, our analysis is more expansive because it also considers employment levels. Note that many low productivity states have relatively low employment ratios, but high compensation ratios. This is not surprising since government workforces are very highly unionized. Since unions work for current government employees (not future ones) it would be expected that they would want to restrict entry and boost returns. However, this suggests that these states (and their taxpayers) would be better off hiring more workers, but paying a more modest compensation package, especially benefits.
Finally, comparing to the private sector is appropriate because its health is inversely related to government productivity. Not only does the private sector pick up the bill, but it also has to compete against government for labor. Ironically, the taxes businesses pay can be unfairly used to lure away their own workers. Ultimately, my research shows that government spending can crowd-out the private sector making everyone economically worse off. For more information on the crowd-out effect, see: http://www.familyprosperity.org/media/2017-family-prosperity-index/2017-family-prosperity-index-economics
Thank you Scott!
Thanks for the reply Scott! First of all, I’d like to say that I appreciate what your group is doing in making this data available to the public in a form that allows for reasonable comparisons. (The raw BEA compensation data is a genuine pain to wade through).
I particularly liked your county level data (which one seldom sees) and that you made note of some issues that hadn’t occurred to me before (e.g. that counties with tribally owned casinos can have particularly high ‘local government’ employment ratios).