Public and Private Sector Wage Gap Back in Spotlight

Aug 1, 2012

Starting Wednesday, Governor Terry Branstad starts paying 20 percent of his healthcare premium costs. He signed an executive order last month allowing other state workers to do the same. It has pushing the difference between private and public sector compensation back into the spotlight.

Right now Iowa is among only a handful of states where public workers don’t pay any of those costs.

The governor says no one should be surprised that he’s going to go to the negotiating table later this year to demand state workers pony up 20 percent of the costs. Only 95 state workers signed up for the new voluntary plan. 75 are non contract employees, mostly appointed by the governor.

“I’m pleased that 95 people did this, nobody was required to do this. This is strictly a voluntary thing. I’m encouraged there are that many people that wanted to lead by example”

It appears the political time is right for this kind of action.

“In 2010 besides Iowa you had more of a class of warrior type of Republicans being elected to governor’s chairs in Florida and Wisconsin for example," said Dennis Goldford, a professor of political science at Drake University. "They’ve shown that under the circumstances we have right now you can make some headway if your agenda is to push back on public sector unions.”

And Governor Branstad is doing just that.

“Public sector workers are not only getting paid more than their private sector counterparts in Iowa," said Governor Branstad. "The gap is the biggest of all 50 states and then they have a Cadillac benefit system that most people in the private sector don’t have.”

“State employees don’t have Cadillac coverage, they have a good plan," said Danny Homan, president of Iowa AFSCME Council 61. "They have a very good plan. But it’s been bargained for over 30 years."

Homan filed a complaint against the governor for signing the executive order. He said Branstad is undermining the collective bargaining process and breaking the law by creating a new healthcare plan and most state workers would feel a larger impact on their spendable income than the governor will.

But Governor Branstad says this is merely leveling the playing field. 

“I don’t see how you can say it’s anything but a negative change in benefits, but remember private sector employees went thru this too," said Mike Ralston, the president of the Iowa Association of Business and Industry. "There was a time in this country where almost all companies paid the entire cost of the health insurance for their employees whether private or public sectors.”

Benefits are just one target of the governor’s criticism.  For example, when he took office, he wanted to reopen negotiations to undo a state worker pay increase negotiated by former governor Chet Culver. Branstad was denied by the unions.

Gov. Branstad points to a recent Iowa Workforce Development wage survey as proof that they’re making too more money than their private counterparts. But Andrew Cannon, a research associate at Iowa Policy Project in Iowa City has studied the difference in wages in the public and private sectors. He says the numbers can be misleading.

“The public sector is largely composed of people like teachers, fire fighters, police officers, people who have pretty extensive training in their field,” Canon said. 

In a recent study conducted by the Iowa Policy Project, Cannon found when average earnings are compared by education level, private-sector workers generally fare better than their public-sector peers. But no matter how you interpret the numbers… who foots the bill for these healthcare costs will continue to create tension between Governor Branstad and the labor unions at the bargaining table later this year.